A Small Producer of Music Boxes Wants to Move to a Larger

question 73

Essay

A small producer of music boxes wants to move to a larger facility.Two alternative facilities have been found.Site 1 has a fixed cost of $500,000 per year,with a variable cost of $25 per unit.Site 2 has a fixed cost of $800,000 per year,but a variable cost of $22 per unit.
a.Write out the equation for total cost for each site.
b.At what volume of output would the two locations have the same total cost?
c.For what range of output would Site 1 be superior?
d.For what range of output would Site 2 be superior?

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Definitions:

Diagnose

The process of identifying and determining the nature of a problem, issue, or condition, often leading to a solution or management strategy.

Occupational Injury

Any cut, fracture, sprain, or amputation resulting from a workplace accident or from an exposure involving an accident in the work environment.

Sprain

An injury to a ligament caused by tearing or stretching, often occurring in joints such as the ankle or wrist.

Amputation

The surgical removal of a body part, often a limb; in the workplace, it can result from severe injuries typically involving machinery or accidents.