Question

A manufacturing company is considering two alternative locations for a new facility. The fixed and variable costs for the two locations are found in the table below. For which volume of business would the two locations be equally attractive? If the company plans on producing 50,000 units, which location would be more attractive?

glen rose mesquite

fixed cost $1 000 000 $1 500 000

variable cost per unit $ 25 23

please show work

Answer 1

• Location 1 FC & 1,000,000 ve $ 25 Location 2 FC & 1,500,000 23 TC, z 1,000,000 +250 TC= 1,500,000 +२3-4 TC, = TC₂ 1,000,ooo +RS 1,500,000 +23n Pre 5oo, ooo 250,000 at Jau TC, 2 250 000 both location will be equally atbractwie a = 50,000 1 000 000 + 25 x 50,000 z 1,000,000 + R50,000 2,259,00.0 3 0 0 0 + 1 500 000 + 23450,000 = 1500,00 1,150,000 2,650,000 as TC, < To hence location 1 is more attracur.