A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs $0.
30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.35 per unit. If annual demand is expected to be 10 million units, which plant offers the lowest total cost?A) plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units B) plant B, because it is cheaper than Plant A for all volumes over 8,000,000 units. C) Plant A, because it is cheaper than Plant B for all volumes D) plant B, because it has the lower variable COM per unit E) Neither Plant A nor Plant B, because (he crossover point is at 10 million units.
1 answer:
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