Hyundai Motors is considering three sites—A, B, and C—at which to locate a factory to build its new-model automo-bile, the Hyundai Sport C150. The goal is to locate at a minimum-cost site, where cost is measured by the annual fixed plus variable costs of production. Hyundai Motors has gathered the followingdata: SITE ANNUALIZEDFIXED COST VARIABLE COST PERAUTO PRODUCEDA $10,000,000 $2,500B $20,000,000 $2,000C $25,000,000 $1,000The firm knows it will produce between 0 and 60,000 Sport C150sat the new plant each year, but, thus far, that is the extent of itsknowledge about production plans.a) For what values of volume, V, of production, if any, is site C arecommended site?b) What volume indicates site A is optimal?c) Over what range of volume is site B optimal? Why?
Hyundai Motors is considering three sites—A, B, and
C—at which to locate a factory to build its new-model automo-
bile, the Hyundai Sport C150. The goal is to locate at a minimum-
cost site, where cost is measured by the annual fixed plus variable
costs of production. Hyundai Motors has gathered the following
data:
SITE
ANNUALIZED
FIXED COST
VARIABLE COST PER
AUTO PRODUCED
A $10,000,000 $2,500
B $20,000,000 $2,000
C $25,000,000 $1,000
The firm knows it will produce between 0 and 60,000 Sport C150s
at the new plant each year, but, thus far, that is the extent of its
knowledge about production plans.
a) For what values of volume, V, of production, if any, is site C a
recommended site?
b) What volume indicates site A is optimal?
c) Over what range of volume is site B optimal? Why?
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