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Homework Answers
Answer:
a)
Site 1:
Fixed Cost = $600000 per year
Variable Cost = $17000 per unit
For Output X
Total Cost per year = 600000 + 17000*X
Site 1:
Fixed Cost = $900000 per year
Variable Cost = $14000 per unit
For Output X
Total Cost per year = 900000 + 14000*X
b)
Same Total Cost
Total Cost per year for site 1 = Total Cost per year for site 2
600000 + 17000*X = 900000 + 14000*X
3000X = 300000
X = 100
We can say that for Output 100, total cost for both site will be same.
Fixed cost for Site 1 is less. So for Output < 100, Site 1 would be superior and for Output > 100, site 2 would be superior
c)
X < 100
d)
X >100
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