Production improvement option B ( with capital costs of $1. 6 million per million pairs of production capacity and annual depreciation costs of 10%) that reduces production run setup costs by 50% each year makes the most economic sense in which one of the following circumstances?
A. Company managers expect to produce 350 models/styles and 4 million pairs of branded footwear on an ongoing basis at a new 4 million pair capacity facility in Latin America annual production run setup costs for 350 models of branded footwear are 9 million
B company manager expect to produce 100 models/styles and 6 million pair off branded footwear ongoing basis at a 6 million pair capacity facility in the Asia pacific annual production run setup cost for 100 models of branded footwear are 2 million
C company manager expect to produce 200 models/styles and 3 million pair off branded footwear ongoing basis at a 3 million pair capacity facility in Europe Africa annual production run setup cost for 200 models of branded footwear are 4. 5 million
D company manager expect to produce 150 models/styles and 3. 6 million pair off branded footwear ongoing basis at a 3 million pair capacity facility in the Europe Africa annual production run setup cost for 150 models of branded footwear are 3. 25 million
E. A company strategy is to pursue actions that will reduce production costs per pair produced at each of its production facilities to as low a level as possible lowering production run set up costs help achieve this strategic objective therefore installing option B should be done at each of the company production facilities irrespective of facility capacity and number of models to be produced
