Production systems

1) A company is considering producing a product for a new market.  The fixed costs required for manufacturing and delivering the product is $50,000 Labor and material costs are estimated to be approximately $25 per product If the product is sold at $35 each, the firms breakeven volume would be:

a) 50,000 units
b) 5,000 units
c) 2,000 units
d) 1429 units
e) 500 units

2) As production systems move from projects to batch production to mass production to continuous production:
a) The resulting products becomes less standardized
b) Production systems become more capital incentive
c) Production systems become less automated
d) Production systems become more flexible
e) None of the above

3) When cost per unit increases as volume increases, this is known as:
a) Economies of scale
b) Diseconomies of scale
c) Economies of scope
d) Best operating level

Solution: