Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Ching-Chang Kuo is considering opening a new foundry
in Denton, Texas; Edwardsville, Illinois; or Fayetteville,
Arkansas, to produce high-quality rifle sights. He has assem-
bled the following fixed-cost and variable-cost data:
PER-UNIT COSTS
LOCATION
FIXED COST
PER YEAR MATERIAL
VARIABLE
LABOR OVERHEAD
Denton $200,000 $ .20 $ .40 $ .40
Edwardsville $180,000 $ .25 $ .75 $ .75
Fayetteville $170,000 $1.00 $1.00 $1.00
a) Graph the total cost lines.
b) Over what range of annual volume is each facility going
to have a competitive advantage?
c) What is the volume at the intersection of the Edwardsville
and Fayetteville cost lines?
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