The Operations Manager Has Narrowed Down the Search for a New

question 95

Essay

The operations manager has narrowed down the search for a new plant to three locations.Fixed and variable costs follow:
$$\begin{array} { | c | c | c | } \hline \text { Location } & \begin{array} { c } \text { Fixed Costs } \\\text { Per Year }\end{array} & \begin{array} { c } \text { Variable Costs } \\\text { Per Unit }\end{array} \\\hline \text { A } & 70,000 & 25 \\\text { B } & 120,000 & 22 \\\text { C } & 250,000 & 17 \\\hline\end{array}$$
Plot the total cost curves in the chart provided below,and identify the range over which each location would be best.Then use break-even analysis to calculate exactly the break-even quantity that defines each range.

a.What is the break-even quantity between A and B?
b.What is the break-even quantity between B and C?

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Definitions:

John Watson

An American psychologist who established the psychological school of behaviorism, emphasizing the study of observable behavior and the rejection of the introspective method.

Token Economy

A program in which good behavior is rewarded with tokens that can be exchanged for privileges.

Behavioral Activation System

A neuroscience concept related to the brain mechanisms that regulate approach behavior and motivation towards reward.

Conditioned Stimulus

The stimulus that produces the conditioned response after classical conditioning (e.g., a bell causing dogs to salivate).