A Manufacturing Company Is Considering Three Expansion Options

question 1

Essay

A manufacturing company is considering three expansion options. The first is to do nothing (Option
A). The next is to leave the current plant open and also open a new larger plant (Option
B). Finally they could close the existing plant and open the new, larger one (Option
C). Given the VC and FC from the table below calculate the range for which each option minimizes cost.
$$\begin{array} { | l | l | l | } \hline\text { Option } & \text { FC } ( \$ ) & \text { VC (\$/unit) } \\\hline \mathrm { A } & 50000 & 2 \\\hline \mathrm { B } & 100000 & 1 \\\hline \mathrm { C } & 60000 & 1.4 \\\hline\end{array}$$

• A). The next is to leave the current plant open and also open a new larger plant (Option
• B). Finally they could close the existing plant and open the new, larger one (Option
• C). Given the VC and FC from the table below calculate the range for which each option minimizes cost.
• \[\begin{array} { | l | l | l | }
• \hline\text { Option } & \text { FC } ( \$ ) & \text { VC (\$/unit) } \\
• \hline \mathrm { A } & 50000 & 2 \\
• \hline \mathrm { B } & 100000 & 1 \\
• \hline \mathrm { C } & 60000 & 1.4 \\
• \hline
• \end{array}\]

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Definitions:

Basal Metabolic Rate

How quickly the body expends energy to sustain essential activities like respiration and blood circulation when at rest.

Settling Point

A theory suggesting that body weight is regulated at a predetermined, or preferred, level by a feedback control mechanism.

Set Point

A theory suggesting that the body regulates its weight and energy balance through internal controls, maintaining a stable weight over time.

Arcuate Nucleus

A nucleus in the hypothalamus involved in appetite regulation and many other critical bodily functions.