Table 13.8
An operations manager has narrowed down the search for a new plant for Tim! to three locations. Fixed and variable costs follow.

-Excel Products is planning a new warehouse to serve the Southeast. Locations A, B, and C are under consideration. Fixed and variable costs follow.
Which of the following statements is best?
A) Location A is the best one if volumes are quite high.
B) Location B is best over all volume levels.
C) The total cost of location A, if the volume is 250,000 units, is over $8,000,000.
D) The break-even quantity between A and B is more than 85,000 units but fewer than 200,000 units.

Question

Table 13.8
An operations manager has narrowed down the search for a new plant for Tim! to three locations. Fixed and variable costs follow.
 
-Excel Products is planning a new warehouse to serve the Southeast. Locations A, B, and C are under consideration. Fixed and variable costs follow. 
Which of the following statements is best?
A) Location A is the best one if volumes are quite high. 
B) Location B is best over all volume levels. 
C) The total cost of location A, if the volume is 250,000 units, is over $8,000,000. 
D) The break-even quantity between A and B is more than 85,000 units but fewer than 200,000 units.

Quizplus · Accepted Answer

Based on the given data, location B has the lowest total cost at all volume levels. Location A has a lower variable cost but a higher fixed cost, making it more suitable for high volume levels. The total cost of location A at a volume of 250,000 units is approximately $8,282,000, which is higher than both locations B and C. The break-even quantity between A and B falls between 85,000 and 200,000 units, but this information alone does not provide enough insight to determine the best choice. Therefore, location B is the best choice overall.

Table 13.8 an Operations Manager Has Narrowed Down the Search for a for a New