A Manufacturing Company Is Considering Three Expansion Options

question 46

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:

Intersection

In mathematics, the set of elements that are common to two or more sets.

Occurs

Happens or takes place.

Conditional Probability

The likelihood of one event happening when it's known that a different event has already taken place.

Intersection

The point at which two lines or paths cross each other, or the set of elements common to two or more sets.