Problem 2 NanoTech is ready to begin production of its exciting new technology. The company is evaluating three methods of production: (A) a small...
Problem 2
NanoTech is ready to begin production of its exciting new technology. The company is evaluating three methods of production: (A) a small production facility with older equipment, (B) a larger production facility that is more automated, and (C) subcontracting to an electronics manufacturer in Singapore. The costs of each alternative are shown below.
| Process | Fixed Cost | Variable Cost |
| $100,000 | $40 | |
| $400,000 | $20 | |
| $ 0 | $60 |
Draw to illustrate the total costs of the three processes.
Find the two points of indifference that help select the right process;
Determine for what level of demand each production process should be chosen.
