Of the three sites being considered by Rocko Mama’s, A, B and C at which to build its latest state of the art café. The goal is to locate at a minimum cost site, where cost is measured by the annual fixed plus variable costs of production. The fixed annualised costs per site are the following A: $10,000,000, B: $20,000,000 and C: $25,000,000. The variable cost per output produced are A: $2,500, B: $2,000 and C: $1,000. Rocko Mama’s has estimated that it will serve between 0 and 60 000
Of the three sites being considered by Rocko Mama’s, A, B and C at which to build its latest state of the art café. The goal is to locate at a minimum cost site, where cost is measured by the annual fixed plus variable costs of production. The fixed annualised costs per site are the following A: $10,000,000, B: $20,000,000 and C: $25,000,000. The variable cost per output produced are A: $2,500, B: $2,000 and C: $1,000. Rocko Mama’s has estimated that it will serve between 0 and 60 000 clients in the new facility per year. For what values of volume if any would site C be recommended? In addition, what volume indicates site A is optimal? Lastly, over what range of volume is site B optimal?
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