Hyundai Motors is considering three sites—A, B, and C—at which to locate a factory to build its new-model automobile, 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 $2,600 B $20,000,000 $1,900 C $30,000,000 $1,100 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) The value of volume, V, of production above which site C is recommended = nothing Sport C150s (round your response up to the next whole number). b) The value of volume, V, of production below which site A is recommended = nothing Sport C150s (round your response up to the next whole number). c) Over what range of volume is site B optimal? A. Site B is optimal for volumes above 14,286 Sport C150s. B. Site B is optimal for volumes from 13,334 to 14,286 Sport C150s. C. Site B is never optimal because its cost line always exceeds that of A or C for all volume levels. D. Site B is always optimal because its cost line is always below that of A and C for all volume levels. Click to select your answer(s).

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Question

Hyundai Motors is considering three

sites—A,

B, and

C—at

which to locate a factory to build its new-model automobile, 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		$2,600
B	$20,000,000		$1,900
C	$30,000,000		$1,100

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) The value of volume, V, of production above which site

is recommended =

nothing

Sport C150s (round your response up to the next whole number).

b) The value of volume, V, of production below which site

is recommended =

nothing

Sport C150s (round your response up to the next whole number).

c) Over what range of volume is site

optimal?

Site

is optimal for volumes above

14,286

Sport C150s.

Site

is optimal for volumes from

13,334

14,286

Sport C150s.

Site

is never optimal because its cost line always exceeds that of A or C for all volume levels.

Site

is always optimal because its cost line is always below that of A and C for all volume levels.

Click to select your answer(s).

Hyundai Motors is considering three sites—A, B, and C—at which to locate a factory to build its new-model automobile, 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 | $2,600 |
| B | $20,000,000 | $1,900 |
| C | $30,000,000 | $1,100 |

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) The value of volume, V, of production above which site C is recommended = [ ] Sport C150s (round your response up to the next whole number).

b) The value of volume, V, of production below which site A is recommended = [ ] Sport C150s (round your response up to the next whole number).

c) Over what range of volume is site B optimal?

### Explanation of Data

This table provides an overview of the costs associated with each potential site for manufacturing. Each site includes:

- **Annualized Fixed Cost**: The consistent, annual cost that does not change with the number of units produced.
- **Variable Cost per Auto Produced**: The cost incurred for each additional unit of production, changing depending on the number produced.

The task involves determining production thresholds and ranges where each site offers the most cost-effective solution based on these fixed and variable costs.

**Question**: Over what range of volume is site B optimal?

**Options**:

- **A.** Site B is optimal for volumes above 14,286 Sport C150s.

- **B.** Site B is optimal for volumes from 13,334 to 14,286 Sport C150s.

- **C.** Site B is never optimal because its cost line always exceeds that of A or C for all volume levels.

- **D.** Site B is always optimal because its cost line is always below that of A and C for all volume levels.

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