Multiple choice

A component can be produced by any of the four processes I, II, III and IV. The fixed cost and the variable cost for each of the processes are listed below. The most economical process for producing a batch of 100 pieces is

   
Process Fixed cost (in Rs.) Variable cost per piece (in Rs.)
I 20 3
II 50 1
III 40 2
IV 10 4

  1. I

  2. II

  3. III

  4. IV
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total cost for I-process = F.C. + 100 x V.C. = 20 + 100 x 3 = 320 II-Process 50 + 100 x 1 = 150 III-Process 40 + 100 x 2 = 240 IV-Process 10 + 100 x 4 = 410 II-Process has minimum total cost.

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