Ching-Chang Kuo is considering opening a new foundry in Denton, Texas; Edwardsville, Illinois; or Fayetteville, Arkansas, to produce high-quality rifle sights. He has assem- bled the following fixed-cost and variable-cost data: PER-UNIT COSTS LOCATION Denton Edwardsville Fayetteville a) b) c) FIXED COST PER YEAR $200,000 $180,000 $170,000 MATERIAL $.20 $.25 $1.00 VARIABLE LABOR $ .40 $.75 $1.00 OVERHEAD $.40 $.75 $1.00 Graph the total cost lines. Over what range of annual volume is each facility going to have a competitive advantage? What is the volume at the intersection of the Edwardsville and Fayetteville cost lines?
Ching-Chang Kuo is considering opening a new foundry in Denton, Texas; Edwardsville, Illinois; or Fayetteville, Arkansas, to produce high-quality rifle sights. He has assem- bled the following fixed-cost and variable-cost data: PER-UNIT COSTS LOCATION Denton Edwardsville Fayetteville a) b) c) FIXED COST PER YEAR $200,000 $180,000 $170,000 MATERIAL $.20 $.25 $1.00 VARIABLE LABOR $ .40 $.75 $1.00 OVERHEAD $.40 $.75 $1.00 Graph the total cost lines. Over what range of annual volume is each facility going to have a competitive advantage? What is the volume at the intersection of the Edwardsville and Fayetteville cost lines?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![Ching-Chang Kuo is considering opening a new foundry
in Denton, Texas; Edwardsville, Illinois; or Fayetteville,
Arkansas, to produce high-quality rifle sights. He has assem-
bled the following fixed-cost and variable-cost data:
PER-UNIT COSTS
LOCATION
Denton
Edwardsville
Fayetteville
FIXED COST
PER YEAR MATERIAL
$.20
$..25
$1.00
$200,000
$180,000
$170,000
VARIABLE
LABOR OVERHEAD
$.40
$ .40
$.75
$..75
$1.00
$1.00
a) Graph the total cost lines.
b)
Over what range of annual volume is each facility going
to have a competitive advantage?
c)
What is the volume at the intersection of the Edwardsville
and Fayetteville cost lines?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5b0d6112-027f-4702-b596-f7951cf40db7%2F128813fa-ffc0-40f1-b9e1-5e5ded661bae%2F6nnpxkj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Ching-Chang Kuo is considering opening a new foundry
in Denton, Texas; Edwardsville, Illinois; or Fayetteville,
Arkansas, to produce high-quality rifle sights. He has assem-
bled the following fixed-cost and variable-cost data:
PER-UNIT COSTS
LOCATION
Denton
Edwardsville
Fayetteville
FIXED COST
PER YEAR MATERIAL
$.20
$..25
$1.00
$200,000
$180,000
$170,000
VARIABLE
LABOR OVERHEAD
$.40
$ .40
$.75
$..75
$1.00
$1.00
a) Graph the total cost lines.
b)
Over what range of annual volume is each facility going
to have a competitive advantage?
c)
What is the volume at the intersection of the Edwardsville
and Fayetteville cost lines?
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