Question

Dynamo, Inc. is a North Dakota manufacturer of a variety of downhill skis. Dynamo is considering four locations for a new plant: Colorado Springs, Colorado; Wichita, Kansas; Lincoln, Nebraska; and Sioux Falls, South Dakota. Annual fixed costs and variable costs per pair of skis are shown in the table below.

Location Annual Fixed Costs Variable Costs per pair Colorado Springs, CO $6,500,000 $200 Wichita, KS $2,000,000 $150 Lincoln, NE $3,600,000 $100 Sioux Falls, SD $5,000,000 $75 (a) Plot the total cost lines for all locations on a single graph. Indicate on the graph the range in production volume over which each location would be best. Please draw by hand to scale. Use graph paper - you may choose to use the one that the instructor will provide to you through Moodle. (The graphing must not be done by using any graphing software.) [30 points] (b) What breakeven quantities define each of the following transitions? Do this algebraically and comment on how your algebraic results compare with your graphical results in part (a) above. [I] Wichita versus Lincoln transition [8 points) [II] Lincoln versus Sioux Fall transition [8 points] [III] Wichita versus Sioux Fall transition [8 points] (c) Based on the cost information provided in the table above, can Colorado Springs be the best place to locate the ski plant? Clearly explain your answer [8 points). (d) The city of Colorado Springs has promised a tax break that would reduce Dynamo's annual fixed cost by $3.5 million, under the condition that the company locates its plant in that city. By graphing the total cost lines as in (a) above on a separate graph paper, indicate whether, you (as manager making the decision), would accept the city's offer. Based on your graph, clearly explain under what condition(s) you may or may not do so. Please note that aside from this city's offer, all other factors remain unchanged. [20 points]

Please help!

Graph does not need to be hand drawn, I just need an idea of how to do it.

Thanks

Answer 1

Date I Lincoln versus Sioux Lindn = 360000 + 100 x Sioux = 5000000 + 751 -1400000 + 25% Date Colorado can't be the best place because of its high fixed Variable cost. d 1. Shine 5C 0 a = -1400000 + 25 x 56000 units Even if tax break is given fixed cost = 600 000 - 3500000 – 300.000 $ Variable cost: 200 $ I Wichita versus sioux Still we will not accept the offer as Wichita would be still better than Colorado Wichita - 2000000 Siou x = 5000000 + 150x +752 - F.C. Vc. - 300oooo + 75x Caonado Wichita 3 million 2 million 200 150. 0= - 30000 ou + 752 x = 40000 units

Date Date : quaphs 6 Wichita versus. Union transition Total variable cost Co $6007 Total Lost in Wichita - 150 x $400 $ 200 $ 650000 + 2000000 Totalfixed cost 2 3 4 5 Uruts = 10 + 3609000 Total test C in Lincoln 1. Shino 5G Kink As the more number of units. are produced, total cost will be increasing Addikenal 50x - 160gooo Test 200% + 6,500,000$ Equaken - оч total 빠 To be in different between additional cost needs to be cities, o. é where a = no. of units. 0 507 - 1G0Q000 x = 32000 units