A Firm Is Considering Two Location Alternatives

question 78

Multiple Choice

A firm is considering two location alternatives.At location A,fixed costs would be $4,000,000 per year,and variable costs $0.30 per unit.At alternative B,fixed costs would be $3,600,000 per year,with variable costs of $0.35 per unit.If annual demand is expected to be 10 million units,which plant offers the lowest total cost?

• A)Plant A,because it is cheaper than Plant B for all volumes over 8,000,000 units.
• B)Plant B,because it is cheaper than Plant A for all volumes over 8,000,000 units.
• C)Plant A,because it is cheaper than Plant B for all volumes.
• D)Plant B,because it has the lower variable cost per unit.
• E)Neither Plant A nor Plant B,because the crossover point is at 10 million units.

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Definitions:

Professional Talking

The use of formal and industry-specific language in a business setting.

Adaptation

The process of adjusting or changing something to suit a new environment or condition.

Nonverbal Communication

The transmission of information or feelings without the use of spoken words, utilizing gestures, facial expressions, and body language instead.

Visual Aids

Tools or pieces of information such as charts, maps, or photographs used to enhance understanding or retention of information.