Reference no: EM132574490

A retired auto mechanic hopes to open a rustproofing shop. Customers would be local new-car dealers. Two locations are being considered, one in the center of the city and one on the outskirts. The central city location would involve fixed monthly costs of $6,900 and labor, materials, and transportation costs of $30 per car. The outside location would have fixed monthly costs of $4,700 and labor, materials, and transportation costs of $40 per car. Dealer price at either location will be $90 per car.

Question 1: Which location will yield the greatest profit if monthly demand is (1) 200 cars? (2) 300 cars?

200 cars: CityOutside yields the greatest profit.

300 cars: CityOutside yields the greatest profit.

Question 2: At what volume of output will the two sites yield the same monthly profit?