(i) Libra Inc. is trying to decide whether to invest in a new material-handling system. The current system (which is old and completely paid for) has an annual maintenance cost of $10,000 and costs approximately $20 to transport each load of material. The two new systems that are being considered vary both in sophistication and cost. System 1 has a fixed cost of $45,000 and a cost per logad estimated at $10. System 2 has a fixed cost of $100,000 but a per-load cost of $5. At what volume of demand (i.e., number of loads) should Libra Inc. purchase System 1 ? Systern 2 ? (ii) Discuss the types of decisions that are involved in creating a process strategy.

Q&A Education