- You are required to evaluate, the two options for the production of product Z.
Comment and advise Tony accordingly in the production of product Z.(25 marks)
Assuming 40,000 production levels, the cost associated with both the options are as below:
It can be easily seen that the cost of producing 40,000 units is less in case of labor intensive option than the machinery option. For low production levels, it is recommended that labor intensive option is a better option.
However, as the production level goes up, machinery option covers up for the extra machine rental expense and at some level produces units at a lower cost than Continue reading...