Question



Quatro Hermanas, Inc. is investigating implement- ing some new production machinery as part of its operations. Three alternatives have been identified, and thev have the following fixed and variable costs: Annual Annual Variable Costs per Unit $20.00 5.00 7.50 Alternative Fixed Costs $100,000 200,000 150,000 Determine the ranges of production (units produced per year) over which each alternative would be recommended up to 30,000 units per year.
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Answer #1

A

B

C

FC

100000

200000

150000

VC

20

5

7.50

Q

30000

30000

30000

TVC for 30000 units

600000

150000

225000

Total Cost

700000

350000

375000

ATC

23.33

11.67

12.50

Looking at the above table, alternative B has lower total cost and average total cost for 30000 units when compared with A and C, hence alternative B is recommended.

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