COEB 442, Semester 2 2017/18 Assignment 1

Name: __________________________________________ Section: ___________

Hasan and Siti are friends. Hasan has years of food processing experience and Siti has extensive
commercial food preparation experience. They decided to open a company that produces food processor
for industrial use. There are 2 options on how the food product can be produced: manual and mechanized
processes. The manual process will have a monthly fixed cost of RM67,500 and variable costs of RM34.75
per unit. A more mechanized process will have a fixed cost of RM105,000 per month with variable costs
of RM20.25 per unit. Selling price of the food processor is RM130 per unit.

a. Find the break even quantity under both options

b. Find the revenue at the break even quantity for manual and mechanized process.

c. Find the yearly profit or loss under both processes if they expect to sell 1,000 units per month.