Question 2 Option 1 Option 3 Option 2 __________________________________________________________________ Annual fixed cost $2,500 $4,500 $27,000 Variable cost per thousand pounds 100 80 20 1. Based on annual cost, Determine the annual volume (in thousands of pounds) at which the company would be indifferent between Option 1 and Option 2; between Option 2 and option 3; and between Option 1 and option 3. 2. Create a table showing the total annual cost of each option if annual volume (in thousands of pounds) is 50, 200, 350, and 500. Circle the lowest cost at each annual volume. 3. Based only on annual cost, for what range of annual volumes would each option be preferred?
Question 2
Option 1 Option 3 Option 2
__________________________________________________________________
Annual fixed cost $2,500 $4,500 $27,000
Variable cost per thousand pounds 100 80 20
1. Based on annual cost, Determine the annual volume (in thousands of pounds) at which the company
would be indifferent between Option 1 and Option 2; between Option 2 and option 3; and between
Option 1 and option 3.
2. Create a table showing the total annual cost of each option if annual volume (in thousands of pounds)
is 50, 200, 350, and 500. Circle the lowest cost at each annual volume.
3. Based only on annual cost, for what range of annual volumes would each option be preferred? Plot the graph.
4. What nonfinancial factors other than annual cost should be considered when making this decision?
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