Ching-Chang Kuo is considering opening a new foundry in Denton, Texas; Edwardsville, Illinois; or Fayetteville, Arkansas, to produce high-quality rifle sights. He has assem- bled the following fixed-cost and variable-cost data: PER-UNIT COSTS LOCATION Denton Edwardsville Fayetteville a) b) c) FIXED COST PER YEAR $200,000 $180,000 $170,000 MATERIAL $.20 $.25 $1.00 VARIABLE LABOR $ .40 $.75 $1.00 OVERHEAD $.40 $.75 $1.00 Graph the total cost lines. Over what range of annual volume is each facility going to have a competitive advantage? What is the volume at the intersection of the Edwardsville and Fayetteville cost lines?
Ching-Chang Kuo is considering opening a new foundry in Denton, Texas; Edwardsville, Illinois; or Fayetteville, Arkansas, to produce high-quality rifle sights. He has assem- bled the following fixed-cost and variable-cost data: PER-UNIT COSTS LOCATION Denton Edwardsville Fayetteville a) b) c) FIXED COST PER YEAR $200,000 $180,000 $170,000 MATERIAL $.20 $.25 $1.00 VARIABLE LABOR $ .40 $.75 $1.00 OVERHEAD $.40 $.75 $1.00 Graph the total cost lines. Over what range of annual volume is each facility going to have a competitive advantage? What is the volume at the intersection of the Edwardsville and Fayetteville cost lines?
Chapter6: Proudction Costs
Section: Chapter Questions
Problem 8SQP
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