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Location Planning and Analysis

A small producer of machine tools wants to move to a larger building, and has identified two alternatives. Location A has annual fixed costs of $100,000 and variable costs of $13,000 per unit; location B has annual fixed costs of $300,000 and variable costs of $8,000 per unit. The finished items sell for $18,000 each.

a. At what volume of output would the two locations have the same total cost?

Volume of output ____________units

b-1. For what range of output would location A be superior?

Range of output 0 to ______________

b-2. For what range would B be superior?

Range of output _______________or more

Solution Preview

$100,000 and variable costs of $13,000 per unit; location B has annual fixed costs of $300,000 and variable costs of $8,000 per unit. The finished items sell for $18,000 each.

a. At what volume of ...

$2.19