Managing Operations Across the Supply Chain 1st Edition by Morgan Swink,Steven Melnyk,Bixby Cooper, Janet Hartley

Exercise 19

An insurance company is evaluating a new software system designed to reduce the time for claims processing.The fixed costs with the new system are $120,000 per year.The average variable costs with the new system are $20 per claim.The current system being used by the company has fixed costs of $80,000 and variable costs of $35 per claim.What is the indifference point between these two processes? If the company expects to process 3,500 claims per year, which process would you recommend? Why?