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?
Chapter19: Pricing Concepts
Section: Chapter Questions
Problem 6DRQ
Related questions
Question
![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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcc6f6eae-0cbc-4005-8c76-ebb9a7f75543%2Fb4642fe1-c399-431c-835d-2518a431322a%2Fu4wfmg9_processed.jpeg&w=3840&q=75)
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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