A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs $0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.34 per unit. If annual demand is expected to be 9 million units, which plant offers the lowest total cost?

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haseebkhuhro256 haseebkhuhro256 · Answer 1 · 2020-03-12T07:07:55+01:00

Answer:

Plant B

Explanation:

Total Demand = 9000000

Total Cost = Fix Cost + Variable Cost

Location A

Variable Cost = 9000000*0.3 = 2700000

Fix Cost = 4000000

Total Cost = 6700000

Location B

Variable Cost = 9000000*0.34 = 3060000

Fix Cost = 3600000

Total Cost = 6660000

Plant B is feasible because it will Save $40000

andromache andromache · Answer 2 · 2021-12-28T12:44:03+01:00

A) plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units

Fixed Cost = $4,000,000

Variable Cost = $0.30 per unit

Now

For 10 million units, total cost for A = 4,000,000 + 0.3 × 10,000,000

= $7,000,000

At Location B

Total cost = Fixed Cost + Variable cost

= 3,600,000 + 0.35 × 10,000,000

= $7,100,000

Learn more: brainly.com/question/17429689

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