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:

Inventory Process

A systematic approach to managing and tracking stock, materials, or products within a business to ensure adequate supply and efficient operations.

Recurring Shipment

A scheduled shipment that occurs at regular intervals over a period of time.

Data Transmission

The process of sending data from one place to another through any medium or channel.

4G

The fourth generation of broadband cellular network technology, offering high-speed internet access and data transmission.