Answer Happy

1. The Hi-Fi manufacturing company is currently evaluating two possible processes for the manufacture of a toy, and makes available to you the following information. Process A Process B (Sh.) (Sh.) Variable cost per unit 12 14 Sales price per unit 20 20 Total fixed costs per year 3,000,000 2,100,000 Anticipated sales (next 2 years in 400,000 400,000 units) 430,000 500,000 Capacity in units You are required to suggest: i) Which process should be chosen? Substantiate your answer. ii) Would you change your answer as given above if you were informed that the capacities of the two processes are as follows; A - 600,000 units and B-500,000 units. Why? Substantiate your answer