Ching-Chang Kuo is considering opening a new foundryin 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 COSTSLOCATIONDentonEdwardsvilleFayettevilleFIXED COSTPER YEAR MATERIAL$.20$..25$1.00$200,000$180,000$170,000VARIABLELABOR OVERHEAD$.40$ .40$.75$..75$1.00$1.00a) Graph the total cost lines.b)Over what range of annual volume is each facility goingto have a competitive advantage?c)What is the volume at the intersection of the Edwardsvilleand Fayetteville cost lines?

Total cost lines refer to graphical representations that depict the total cost incurred by a…

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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

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?

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Step 1: Define Total Cost Lines

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Step 2: Graph the TC Lines:

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Step 3: Find the range of annual volume to have a competitive advantage.

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Step 4: Find the volume where location E and F cost lines intersect.

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