A manufacturer of paint has two factories located in France and Spain and due to economic conditions must close one of them. The factory productivity data is as follows: $\begin{array}{lcc}&\text { Gallons of Paint } & \text { Total Costs } \
&\text { Produced }(1,000 \mathrm{~s}) & \text { (millions \$) }\
\text { Factory (Spain) } & 4,600,000 & \$ 5,250,000 \
\text { Factory (France) } & 4,000,000 & \$ 3,500,000
\end{array}$
Based on the productivity analysis of both the factories, which of the following statements is true?
A) The factory in Spain is more productive than the factory in France.
B) Based solely on this productivity analysis, the factory in Spain must be closed.
C) Based solely on this productivity analysis, the factory in France must be closed.
D) Both factories have identical productivity levels. So, other criteria must be used to make this decision.

Question

Quizplus · Accepted Answer

The cost per gallon of paint produced is lower for the factory in France (\$3,500,000 / 4,000,000 gallons = \$0.875/gallon) compared to the factory in Spain (\$5,250,000 / 4,600,000 gallons = \$1.1413/gallon), making the French factory more cost-effective or productive in terms of cost per unit of output.

A Manufacturer of Paint Has Two Factories Located in France