Sam Smear Owns a Manufacturing Company That Makes Ball Point

Essay

Sam Smear owns a manufacturing company that makes ball point pens. Currently he is trying to decide between two processes for making the pens. The first process will have a fixed cost of $200,000 per year and variable costs of $0.40 per pen. The second process will have a fixed cost of $250,000 per year and variable costs of $0.30 per pen.
a) Identify which ranges of product volume are best for each process.
b) If Sam makes 200,000 pens, which process provides a lower cost?