ECON 1B03 Lecture Notes - Lecture 1: Variable Cost, Factor X
ECON 1B03 Full Course Notes
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Atherly Appliance Company is making plans to build a new factory to produce toasters. It currently foresees a market of about 15,000 toasters per month, but it has hopes that with aggressive advertising it can expand sales in the future. It has its choice of two different technologies for this factory. Technology A is similar to the methods it is already using in other factories; it is based heavily on manual control of the machines. Technology B is much more extensively computerized. Either technology is expected to have a useful life of about 15 years. Taking account of both the fixed costs and the variable costs inherent in each technology, Atherly estimates that the average total monthly costs would probably vary as follows:
Average Total Monthly Costs
Toasters per month | Technology A | Technology B |
5,000 | $50 | $70 |
10,000 | 40 | 55 |
15,000 | 30 | 40 |
20,000 | 40 | 34 |
25,000 | 50 | 28 |
30,000 | 60 | 35 |
Which technology is most appropriate in terms of todayĆ¢ĀĀs market for Atherly toasters?
What problem could Atherly find itself in if it chooses this technology?
Which choice would you recommend, and why?