Homework Answers
1. BEST BELOW 200 UNITS
2. BELOW 200 AND 450 UNITS
3. ABOVE 450 UNITS
B. SITE 2 IS OPTIMAL BECAUSE OF LOWER FIXED COSR
INDIFFERENCE POINT = (FIXED COST A - FIXED COST B) / (VARIABLE COST
B - VARIABLE COST A)
FOR SITE 1 AND 2
FIXED COST 1 = 600
VARIABLE COST 1 = 10
FIXED COST 2 = 1200
VARIABLE COST 2 = 7
INDIFFERENCE POINT = (600 - 1200) / (7 - 10) = 200 UNITS
FOR SITE 2 AND 3
FIXED COST 2 = 1200
VARIABLE COST 2 = 7
FIXED COST 3 = 2100
VARIABLE COST 3 = 5
INDIFFERENCE POINT = (1200 - 2100) / (5 - 7) = 450
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