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A manufacturing company preparing to build a new plant is considering three potential locations for it. The fixed and variable costs for each alternative location are presented below
Costs A B C
Fixed ($) 2,000 3,000 4,000
Variable ($ per unit) 40 25 18
1. The cost functions for all three options are:
2.Location A is the best (low cost) option for production volumes between:
3. Location B is the best (low cost) option for production volumes between:
4.Location C is the best (low cost) option for production volumes between:
5. If the variable cost for Location C increases to $30, can option C still be an option? Explain.
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Describe the four options highlighted in the case in terms of their feasibility, acceptability and vulnerability.
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