An Operations Manager Has Narrowed Down the Search for a New

question 78

Multiple Choice

An operations manager has narrowed down the search for a new King Kola 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. Which of the following statements is correct?

• A)By inspection,it is apparent that only one site will be the best place to produce,even at dramatically different output volumes.
• B)Location A becomes the most expensive place to produce at volumes in excess of 2,000.
• C)The break-even quantity between A and B is less than or equal to 5,000 units.
• D)The break-even quantity between C and B is more than 20,000 units.

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Definitions:

Total Assets

The sum of all current and non-current assets owned by a company, including cash, inventory, property, and equipment.

Gross Margin Percentage

A financial metric that represents the gross margin as a percentage of total sales revenue, indicating the efficiency of a company in producing and selling goods.

Price-Earnings Ratio

A valuation metric for stocks, calculated by dividing the market price of a stock by its earnings per share, indicating the dollar amount an investor can expect to invest in a company to receive one dollar of that company’s earnings.

Common Stock

Equity ownership in a corporation, with shareholders entitled to vote on corporate matters and receive dividends when declared.