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A manufacturer must choose between locating in Atlanta (fixed cost of $60,000/year and variable cost of $25 per unit) or Denver (fixed cost of $80,000/ year and variable cost of $20 per unit)? In either case the product will be sold for $50. What is the point of indifference between the two locations in terms of units produced? 5a) What is the point of indifference between the two locations in terms of units produced? 5b) Which location should the manufacturer choose if expected sales are 3200 units?

A manufacturer must choose between locating in Atlanta (fixed cost of $60,000/year and variable cost of $25 per unit) or Denver (fixed cost of $80,000/ year and variable cost of $20 per unit)? In either case the product will be sold for $50. What is the point of indifference between the two locations in terms of units produced? 5a) What is the point of indifference between the two locations in terms of units produced? 5b) Which location should the manufacturer choose if expected sales are 3200 units?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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5. A manufacturer must choose between locating in Atlanta (fixed cost of $60,000/year and variable cost of $25 per unit) or Denver (fixed cost of $80,000/ year and variable cost of $20 per unit)? In either case the product will be sold for $50. What is the point of indifference between the two locations in terms of units produced? 5a) What is the point of indifference between the two locations in terms of units produced? 5b) Which location should the manufacturer choose if expected sales are 3200 units? + 6. The University cafeteria is offering meal plans for their students on a tight budget. They can choose: • the GOLD PLAN and pay $200 / month for breakfast & lunch every day at no extra charge ($0/ meal) • OR they could choose the SILVER PLAN and pay $40 / month for the rights to purchase meals at $4/ meal • OR they could choose NO PLAN ($0/month) and continue paying an average of $6 per meal. 6a) What is the minimum number of meals a student needs to eat at the cafeteria each month before it is worthwhile to purchase the Gold plan? 6b) Which plan should the student choose if she expects to eat 15 meals per month at the cafeteria? esc 7. The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. If they choose to include a salad bar (i.e., the MAKE option), it will cost $14,000 in annual fixed costs for the leased equipment and added employee, and $1 per salad variable cost. If they choose to have pre-made salads (i.e., the BUY option), it will cost $3 per salad. 1 2 # 3 20 $ 4 www. % 5 H 6 1 & 7 8 O
Transcribed Image Text:5. A manufacturer must choose between locating in Atlanta (fixed cost of $60,000/year and variable cost of $25 per unit) or Denver (fixed cost of $80,000/ year and variable cost of $20 per unit)? In either case the product will be sold for $50. What is the point of indifference between the two locations in terms of units produced? 5a) What is the point of indifference between the two locations in terms of units produced? 5b) Which location should the manufacturer choose if expected sales are 3200 units? + 6. The University cafeteria is offering meal plans for their students on a tight budget. They can choose: • the GOLD PLAN and pay $200 / month for breakfast & lunch every day at no extra charge ($0/ meal) • OR they could choose the SILVER PLAN and pay $40 / month for the rights to purchase meals at $4/ meal • OR they could choose NO PLAN ($0/month) and continue paying an average of $6 per meal. 6a) What is the minimum number of meals a student needs to eat at the cafeteria each month before it is worthwhile to purchase the Gold plan? 6b) Which plan should the student choose if she expects to eat 15 meals per month at the cafeteria? esc 7. The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. If they choose to include a salad bar (i.e., the MAKE option), it will cost $14,000 in annual fixed costs for the leased equipment and added employee, and $1 per salad variable cost. If they choose to have pre-made salads (i.e., the BUY option), it will cost $3 per salad. 1 2 # 3 20 $ 4 www. % 5 H 6 1 & 7 8 O
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