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a. At what volume of output would the two locations have the same total cost? b. For what range of output would location A be superior? For what range would B be superior? а.

a. At what volume of output would the two locations have the same total cost? b. For what range of output would location A be superior? For what range would B be superior? а.

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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3. A small producer of machine tools want to move to a larger building, and has identified two alternatives. Location A has annual fixed costs of $800,000 and variable costs of $14,000 pre unit; location B has annual fixed costs of $920,000 and variable costs of $13,000 per unit. The finished items sell for $17,000 each. a. At what volume of output would the two locations have the same total cost? b. For what range of output would location A be superior? For what range would B be superior? *Note: consider setting up the table as in problem for A and B locations.
Transcribed Image Text:3. A small producer of machine tools want to move to a larger building, and has identified two alternatives. Location A has annual fixed costs of $800,000 and variable costs of $14,000 pre unit; location B has annual fixed costs of $920,000 and variable costs of $13,000 per unit. The finished items sell for $17,000 each. a. At what volume of output would the two locations have the same total cost? b. For what range of output would location A be superior? For what range would B be superior? *Note: consider setting up the table as in problem for A and B locations.
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