An operations manager has narrowed down the search for a new

Question

An operations manager has narrowed down the search for a new plant for McIntosh Enterprises to three locations. Fixed and variable costs follow:

Location	Fixed Cost	Variable Cost
A	$100,000	$10
B	$150,000	$7
C	$200,000	$5

Plot the total cost curves in the chart provided and identify the range over which each location would be best. Then use break-even analysis to calculate exactly the break-even quantity that defines each range.

Which of the following statements is correct?

A) Location C is the best one if volumes are quite low.

B) Location A becomes the most expensive place to produce at volumes less than 10,000.

C) The break-even quantity between A and B is less than or equal to 17,000 units.

D) The break-even quantity between C and B is more than 30,000 units.

Answer

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