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The HERCULES company's Process Manager should decide the location of his company's facilities. He has come up with 4 options in 4 communities. The table below shows fixed (land purchase costs, taxes, insurance, machinery, building erection costs, etc.) and variable costs (wages, materials, transportation costs, etc.) for each option Community A B C D Fixed costs (Annual) $ 150,000 $ 300,000 $ 500,000 $ 600,000 Variable costs (per unit of product) $62 $ 38 $24 $ 30 Issues: (a) Calculate the range of output for which each community minimizes its production costs. (b) If the expected demand for the product is 15,000 units per year, in which community would you advise the process manager to locate his company's plant?

The HERCULES company's Process Manager should decide the location of his company's facilities. He has come up with 4 options in 4 communities. The table below shows fixed (land purchase costs, taxes, insurance, machinery, building erection costs, etc.) and variable costs (wages, materials, transportation costs, etc.) for each option Community A B C D Fixed costs (Annual) $ 150,000 $ 300,000 $ 500,000 $ 600,000 Variable costs (per unit of product) $62 $ 38 $24 $ 30 Issues: (a) Calculate the range of output for which each community minimizes its production costs. (b) If the expected demand for the product is 15,000 units per year, in which community would you advise the process manager to locate his company's plant?

Practical Management Science
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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The HERCULES company's Process Manager should decide the location of his company's facilities. He has come up with 4 options in 4 communities. The table below shows fixed (land purchase costs, taxes, insurance, machinery, building erection costs, etc.) and variable costs (wages, materials, transportation costs, etc.) for each option Community Issues: A B с D Fixed costs (Annual) $ 150,000 $ 300,000 $ 500,000 $ 600,000 Variable costs (per unit of product) $ 62 $ 38 $ 24 $ 30 (a) Calculate the range of output for which each community minimizes its production costs. (b) If the expected demand for the product is 15,000 units per year, in which community would you advise the process manager to locate his company's plant?
Transcribed Image Text:The HERCULES company's Process Manager should decide the location of his company's facilities. He has come up with 4 options in 4 communities. The table below shows fixed (land purchase costs, taxes, insurance, machinery, building erection costs, etc.) and variable costs (wages, materials, transportation costs, etc.) for each option Community Issues: A B с D Fixed costs (Annual) $ 150,000 $ 300,000 $ 500,000 $ 600,000 Variable costs (per unit of product) $ 62 $ 38 $ 24 $ 30 (a) Calculate the range of output for which each community minimizes its production costs. (b) If the expected demand for the product is 15,000 units per year, in which community would you advise the process manager to locate his company's plant?
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