Process Planning & Technology Decisions - Fixed Costs, Variable Costs, Margins, etc.

Background:

Effective operations managers must understand how to use process strategy as a competitive weapon. Production processes need to be selected that provide quality, flexibility, and a favorable cost structure while meeting product and volume requirements. Creative ways to combine the low unit cost of high-volume, low varitey manufacturing with the customization available through low-volume, high-variety facilities need to be sought out.

Questions for Thought:

1. What happens to a firm's break-even point when fixed costs decrease (all other things held constant)?

2. Why are managers constantly looking for ways to lower their fixed and/or variable costs?

3. How many aluminum cans would you have to collect to break-even following Kramer and Neuman's scheme in the Bottle Depsoit episode of Seinfeld? Set up the break-even model.