The Operations Manager Has Narrowed Down the Search for a New

question 7

Essay

The operations manager has narrowed down the search for a new plant to three locations.Fixed and variable costs follow. Plot the total cost curves in the chart provided 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:

Opportunity Costs

The cost of foregoing the next best alternative when a decision is made to pursue a particular action.

Total Revenues

The total amount of money received by a company from its sales of goods or services, before any expenses are subtracted.

Entrepreneur's Talent

The unique set of skills, insights, and intuitions possessed by an entrepreneur that contributes to the successful establishment and growth of a business.

Implicit Costs

Indirect, non-monetary expenses involved in pursuing an activity or decision, often reflected as the opportunity cost of using resources.