The output at which two locations will have same profit. Introduction : Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 8, Problem 19P

a)

Summary Introduction

To determine: The output at which two locations will have same profit.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

a)

Expert Solution

Answer to Problem 19P

At 120 machine tools, the profits at both the locations are identical.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which two locations will have same profit:

Denote the volume of production of machine tools as “x”.

Given the selling price of each machine tool at $29,000, the total revenues, denoted by TR are

TR=$29,000x (1)

Given the B location has a fixed cost of $800,000 per year and a variable cost of $14,000, express the total cost TC_B for a production volume of “x” machine tools as follows.

TCB=$14,000x+$800,000 (2)

Given the Mc location has a fixed cost of $920,000 per year and a variable cost of $13,000, express the total cost TC_Mc for a production volume of “x” machine tools as follows.

TCMc=$13,000x+$920,000 (3)

Calculate the volume of output “x” where both locations have the same profit

$29,000×x−$14,000×x−$800,000=$29,000−$13,000×x−$920,000($29,000−$14,000)×x−$800,000=($29,000−$13,000)×x−$920,000$1,000×x=$120,000x=120 units

Equating the equations and solving for x, the volume of production of 120 machine tools, the profits at both the locations are identical.

Hence, at 120 machine tools, the profits at both the locations are identical

b)

Summary Introduction

To determine: The output at which location B will have high profit than location Mc.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

b)

Expert Solution

Answer to Problem 19P

Upto production level of 120 units Location B will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location B will have high profit than location Mc:

To find out at what range of output the location B will have higher profits compared to the location Mc draw graphs of the two cost functions TC_B and TC_Mc besides the revenues TR as shown below.

EBK PRINCIPLES OF OPERATIONS MANAGEMENT, Chapter 8, Problem 19P

The graph lines for TC_B and TC_Mc intersect at a production volume of 120 machine tools.

The location B is cost effective up to a production volume of 120 units. Therefore, profitability also will be higher at location B upto a production level of 120 units.

Hence, upto production level of 120 units Location B will have high profit.

c)

Summary Introduction

To determine: The output at which location Mc will have high profit than location B.

c)

Expert Solution

Answer to Problem 19P

For production level above 120 units Location Mc will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location Mc will have high profit than location B:

For production volumes above 120 machine tools, the Mc location is preferable as costs are lower and the profitability improves.

Hence, above production level of 120 units Location Mc will have high profit.

d)

Summary Introduction

To determine: The break-even point of each location.

d)

Expert Solution

Answer to Problem 19P

The break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation of break-even point:

Calculate the break even point for Bhnm location by linking equations (1) and (2), since at the break even point the total revenues are same as total costs.

14,000×x+800,000=29,000×x15,000x=800,000x=800,00015,000=53.3

Ignoring the fractional part, the location B breaks even at a production volume of 54 machine tools.

Similarly calculate the break even point for Mckny location by linking equations (1) and (3), since at the break even point the total revenues are same as total costs.

13,000×x+920,000=29,000×x16,000x=920,000x=920,00016,000x=57.5

Ignoring the fractional part, the Mc location breaks even at a production volume of 58 machine tools. Breakeven production volumes for both the locations are much below the crossover production volume of 120 machine tools.

Hence, the break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

What is Bitcoin? How important is it to businesses and individuals? How does it cause environmental damage and is that damage worth continued uses of Bitcoin? Read the following articles to help answer these questions: United Nations University. (2023, October 24). UN study reveals the hidden environmental impacts of bitcoin: Carbon is not the only harmful by-product. https://unu.edu/press-release/un-study-reveals-hidden-environmental-impacts-bitcoin-carbon-not-only-harmful-product#:~:text=Bitcoin%2C%20the%20most%20popular%20cryptocurrency,the%20worldwide%20Bitcoin%20mining%20network. Salam, E. (2023, April 26). Bitcoin is terrible for the environment – can it ever go green? The Guardian. https://www.theguardian.com/technology/2023/apr/26/bitcoin-mining-climate-crisis-environmental-impact

419 X .com/courses/1546/assignments/49499?module_item_id=111573 Unlimited Attempts Allowed ✓ Details Directions: Record a video of yourself giving a business presentation. Imagine you are tasked with researching a professional development topic on business communication for 40 coworkers. You are then expected to give a 4 - 5 minute presentation on the topic. Choose any topic related to business communication, such as intercultural communication, effective leadership, professional writing, etc. Research the topic and prepare a 4 - 5 minute presentation that could be given over video conference call (such as Zoom). You may use visual aids if you choose. Upload a video file of your presentation. Provide all needed citations. Requirements: 4-5 minutes long Contains visual and audio Create your own work; do not plagiarize Cite your sources using APA citations Choose a submission type T

acts Container chips (s 150 cussion: Conflict X + e.com/courses/1546/discussion_topics/15722?module_item_id=111559 24 Winter > Discussions > Week 8 Discussion: Conflict 时☆ 26 Replies, 26 Unread Week 8 Discussion: Conflict Write a 200 - 300 word discussion post based on the prompt below. Reply to at least one other student in 50 - 100 words. Can you think of a time when a conflict led to a new opportunity, better understanding, or other positive result? If not, think of a past conflict and imagine a positive outcome. Discuss the impact of this conflict on your workplace relationships, productivity, and innovation. Source: Business Communication for Success. (2015). University of Minnesota Libraries Publishing. Attribution-NonCommerical-ShareAlike. Edit View Insert Format Tools Table 12ptv Paragraph BIUA T2

Answer 2

Question

Chapter 8, Problem 19P

a)

Summary Introduction

To determine: The output at which two locations will have same profit.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

a)

Expert Solution

Answer to Problem 19P

At 120 machine tools, the profits at both the locations are identical.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which two locations will have same profit:

Denote the volume of production of machine tools as “x”.

Given the selling price of each machine tool at $29,000, the total revenues, denoted by TR are

TR=$29,000x (1)

Given the B location has a fixed cost of $800,000 per year and a variable cost of $14,000, express the total cost TC_B for a production volume of “x” machine tools as follows.

TCB=$14,000x+$800,000 (2)

Given the Mc location has a fixed cost of $920,000 per year and a variable cost of $13,000, express the total cost TC_Mc for a production volume of “x” machine tools as follows.

TCMc=$13,000x+$920,000 (3)

Calculate the volume of output “x” where both locations have the same profit

$29,000×x−$14,000×x−$800,000=$29,000−$13,000×x−$920,000($29,000−$14,000)×x−$800,000=($29,000−$13,000)×x−$920,000$1,000×x=$120,000x=120 units

Equating the equations and solving for x, the volume of production of 120 machine tools, the profits at both the locations are identical.

Hence, at 120 machine tools, the profits at both the locations are identical

b)

Summary Introduction

To determine: The output at which location B will have high profit than location Mc.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

b)

Expert Solution

Answer to Problem 19P

Upto production level of 120 units Location B will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location B will have high profit than location Mc:

To find out at what range of output the location B will have higher profits compared to the location Mc draw graphs of the two cost functions TC_B and TC_Mc besides the revenues TR as shown below.

EBK PRINCIPLES OF OPERATIONS MANAGEMENT, Chapter 8, Problem 19P

The graph lines for TC_B and TC_Mc intersect at a production volume of 120 machine tools.

The location B is cost effective up to a production volume of 120 units. Therefore, profitability also will be higher at location B upto a production level of 120 units.

Hence, upto production level of 120 units Location B will have high profit.

c)

Summary Introduction

To determine: The output at which location Mc will have high profit than location B.

c)

Expert Solution

Answer to Problem 19P

For production level above 120 units Location Mc will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location Mc will have high profit than location B:

For production volumes above 120 machine tools, the Mc location is preferable as costs are lower and the profitability improves.

Hence, above production level of 120 units Location Mc will have high profit.

d)

Summary Introduction

To determine: The break-even point of each location.

d)

Expert Solution

Answer to Problem 19P

The break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation of break-even point:

Calculate the break even point for Bhnm location by linking equations (1) and (2), since at the break even point the total revenues are same as total costs.

14,000×x+800,000=29,000×x15,000x=800,000x=800,00015,000=53.3

Ignoring the fractional part, the location B breaks even at a production volume of 54 machine tools.

Similarly calculate the break even point for Mckny location by linking equations (1) and (3), since at the break even point the total revenues are same as total costs.

13,000×x+920,000=29,000×x16,000x=920,000x=920,00016,000x=57.5

Ignoring the fractional part, the Mc location breaks even at a production volume of 58 machine tools. Breakeven production volumes for both the locations are much below the crossover production volume of 120 machine tools.

Hence, the break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 8, Problem 19P

a)

Summary Introduction

To determine: The output at which two locations will have same profit.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

a)

Expert Solution

Answer to Problem 19P

At 120 machine tools, the profits at both the locations are identical.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which two locations will have same profit:

Denote the volume of production of machine tools as “x”.

Given the selling price of each machine tool at $29,000, the total revenues, denoted by TR are

TR=$29,000x (1)

Given the B location has a fixed cost of $800,000 per year and a variable cost of $14,000, express the total cost TC_B for a production volume of “x” machine tools as follows.

TCB=$14,000x+$800,000 (2)

Given the Mc location has a fixed cost of $920,000 per year and a variable cost of $13,000, express the total cost TC_Mc for a production volume of “x” machine tools as follows.

TCMc=$13,000x+$920,000 (3)

Calculate the volume of output “x” where both locations have the same profit

$29,000×x−$14,000×x−$800,000=$29,000−$13,000×x−$920,000($29,000−$14,000)×x−$800,000=($29,000−$13,000)×x−$920,000$1,000×x=$120,000x=120 units

Equating the equations and solving for x, the volume of production of 120 machine tools, the profits at both the locations are identical.

Hence, at 120 machine tools, the profits at both the locations are identical

b)

Summary Introduction

To determine: The output at which location B will have high profit than location Mc.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

b)

Expert Solution

Answer to Problem 19P

Upto production level of 120 units Location B will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location B will have high profit than location Mc:

To find out at what range of output the location B will have higher profits compared to the location Mc draw graphs of the two cost functions TC_B and TC_Mc besides the revenues TR as shown below.

EBK PRINCIPLES OF OPERATIONS MANAGEMENT, Chapter 8, Problem 19P

The graph lines for TC_B and TC_Mc intersect at a production volume of 120 machine tools.

The location B is cost effective up to a production volume of 120 units. Therefore, profitability also will be higher at location B upto a production level of 120 units.

Hence, upto production level of 120 units Location B will have high profit.

c)

Summary Introduction

To determine: The output at which location Mc will have high profit than location B.

c)

Expert Solution

Answer to Problem 19P

For production level above 120 units Location Mc will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location Mc will have high profit than location B:

For production volumes above 120 machine tools, the Mc location is preferable as costs are lower and the profitability improves.

Hence, above production level of 120 units Location Mc will have high profit.

d)

Summary Introduction

To determine: The break-even point of each location.

d)

Expert Solution

Answer to Problem 19P

The break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation of break-even point:

Calculate the break even point for Bhnm location by linking equations (1) and (2), since at the break even point the total revenues are same as total costs.

14,000×x+800,000=29,000×x15,000x=800,000x=800,00015,000=53.3

Ignoring the fractional part, the location B breaks even at a production volume of 54 machine tools.

Similarly calculate the break even point for Mckny location by linking equations (1) and (3), since at the break even point the total revenues are same as total costs.

13,000×x+920,000=29,000×x16,000x=920,000x=920,00016,000x=57.5

Ignoring the fractional part, the Mc location breaks even at a production volume of 58 machine tools. Breakeven production volumes for both the locations are much below the crossover production volume of 120 machine tools.

Hence, the break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 8, Problem 19P

a)

Summary Introduction

To determine: The output at which two locations will have same profit.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

a)

Expert Solution

Answer to Problem 19P

At 120 machine tools, the profits at both the locations are identical.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which two locations will have same profit:

Denote the volume of production of machine tools as “x”.

Given the selling price of each machine tool at $29,000, the total revenues, denoted by TR are

TR=$29,000x (1)

Given the B location has a fixed cost of $800,000 per year and a variable cost of $14,000, express the total cost TC_B for a production volume of “x” machine tools as follows.

TCB=$14,000x+$800,000 (2)

Given the Mc location has a fixed cost of $920,000 per year and a variable cost of $13,000, express the total cost TC_Mc for a production volume of “x” machine tools as follows.

TCMc=$13,000x+$920,000 (3)

Calculate the volume of output “x” where both locations have the same profit

$29,000×x−$14,000×x−$800,000=$29,000−$13,000×x−$920,000($29,000−$14,000)×x−$800,000=($29,000−$13,000)×x−$920,000$1,000×x=$120,000x=120 units

Equating the equations and solving for x, the volume of production of 120 machine tools, the profits at both the locations are identical.

Hence, at 120 machine tools, the profits at both the locations are identical

b)

Summary Introduction

To determine: The output at which location B will have high profit than location Mc.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

b)

Expert Solution

Answer to Problem 19P

Upto production level of 120 units Location B will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location B will have high profit than location Mc:

To find out at what range of output the location B will have higher profits compared to the location Mc draw graphs of the two cost functions TC_B and TC_Mc besides the revenues TR as shown below.

EBK PRINCIPLES OF OPERATIONS MANAGEMENT, Chapter 8, Problem 19P

The graph lines for TC_B and TC_Mc intersect at a production volume of 120 machine tools.

The location B is cost effective up to a production volume of 120 units. Therefore, profitability also will be higher at location B upto a production level of 120 units.

Hence, upto production level of 120 units Location B will have high profit.

c)

Summary Introduction

To determine: The output at which location Mc will have high profit than location B.

c)

Expert Solution

Answer to Problem 19P

For production level above 120 units Location Mc will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location Mc will have high profit than location B:

For production volumes above 120 machine tools, the Mc location is preferable as costs are lower and the profitability improves.

Hence, above production level of 120 units Location Mc will have high profit.

d)

Summary Introduction

To determine: The break-even point of each location.

d)

Expert Solution

Answer to Problem 19P

The break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation of break-even point:

Calculate the break even point for Bhnm location by linking equations (1) and (2), since at the break even point the total revenues are same as total costs.

14,000×x+800,000=29,000×x15,000x=800,000x=800,00015,000=53.3

Ignoring the fractional part, the location B breaks even at a production volume of 54 machine tools.

Similarly calculate the break even point for Mckny location by linking equations (1) and (3), since at the break even point the total revenues are same as total costs.

13,000×x+920,000=29,000×x16,000x=920,000x=920,00016,000x=57.5

Ignoring the fractional part, the Mc location breaks even at a production volume of 58 machine tools. Breakeven production volumes for both the locations are much below the crossover production volume of 120 machine tools.

Hence, the break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 8, Problem 19P

a)

Summary Introduction

To determine: The output at which two locations will have same profit.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

a)

Expert Solution

Answer to Problem 19P

At 120 machine tools, the profits at both the locations are identical.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which two locations will have same profit:

Denote the volume of production of machine tools as “x”.

Given the selling price of each machine tool at $29,000, the total revenues, denoted by TR are

TR=$29,000x (1)

Given the B location has a fixed cost of $800,000 per year and a variable cost of $14,000, express the total cost TC_B for a production volume of “x” machine tools as follows.

TCB=$14,000x+$800,000 (2)

Given the Mc location has a fixed cost of $920,000 per year and a variable cost of $13,000, express the total cost TC_Mc for a production volume of “x” machine tools as follows.

TCMc=$13,000x+$920,000 (3)

Calculate the volume of output “x” where both locations have the same profit

$29,000×x−$14,000×x−$800,000=$29,000−$13,000×x−$920,000($29,000−$14,000)×x−$800,000=($29,000−$13,000)×x−$920,000$1,000×x=$120,000x=120 units

Equating the equations and solving for x, the volume of production of 120 machine tools, the profits at both the locations are identical.

Hence, at 120 machine tools, the profits at both the locations are identical

b)

Summary Introduction

To determine: The output at which location B will have high profit than location Mc.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

b)

Expert Solution

Answer to Problem 19P

Upto production level of 120 units Location B will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location B will have high profit than location Mc:

To find out at what range of output the location B will have higher profits compared to the location Mc draw graphs of the two cost functions TC_B and TC_Mc besides the revenues TR as shown below.

EBK PRINCIPLES OF OPERATIONS MANAGEMENT, Chapter 8, Problem 19P

The graph lines for TC_B and TC_Mc intersect at a production volume of 120 machine tools.

The location B is cost effective up to a production volume of 120 units. Therefore, profitability also will be higher at location B upto a production level of 120 units.

Hence, upto production level of 120 units Location B will have high profit.

c)

Summary Introduction

To determine: The output at which location Mc will have high profit than location B.

c)

Expert Solution

Answer to Problem 19P

For production level above 120 units Location Mc will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location Mc will have high profit than location B:

For production volumes above 120 machine tools, the Mc location is preferable as costs are lower and the profitability improves.

Hence, above production level of 120 units Location Mc will have high profit.

d)

Summary Introduction

To determine: The break-even point of each location.

d)

Expert Solution

Answer to Problem 19P

The break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation of break-even point:

Calculate the break even point for Bhnm location by linking equations (1) and (2), since at the break even point the total revenues are same as total costs.

14,000×x+800,000=29,000×x15,000x=800,000x=800,00015,000=53.3

Ignoring the fractional part, the location B breaks even at a production volume of 54 machine tools.

Similarly calculate the break even point for Mckny location by linking equations (1) and (3), since at the break even point the total revenues are same as total costs.

13,000×x+920,000=29,000×x16,000x=920,000x=920,00016,000x=57.5

Ignoring the fractional part, the Mc location breaks even at a production volume of 58 machine tools. Breakeven production volumes for both the locations are much below the crossover production volume of 120 machine tools.

Hence, the break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Answer 6

Chapter 8, Problem 19P

a)

Summary Introduction

To determine: The output at which two locations will have same profit.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

a)

Expert Solution

Answer to Problem 19P

At 120 machine tools, the profits at both the locations are identical.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which two locations will have same profit:

Denote the volume of production of machine tools as “x”.

Given the selling price of each machine tool at $29,000, the total revenues, denoted by TR are

TR=$29,000x (1)

Given the B location has a fixed cost of $800,000 per year and a variable cost of $14,000, express the total cost TC_B for a production volume of “x” machine tools as follows.

TCB=$14,000x+$800,000 (2)

Given the Mc location has a fixed cost of $920,000 per year and a variable cost of $13,000, express the total cost TC_Mc for a production volume of “x” machine tools as follows.

TCMc=$13,000x+$920,000 (3)

Calculate the volume of output “x” where both locations have the same profit

$29,000×x−$14,000×x−$800,000=$29,000−$13,000×x−$920,000($29,000−$14,000)×x−$800,000=($29,000−$13,000)×x−$920,000$1,000×x=$120,000x=120 units

Equating the equations and solving for x, the volume of production of 120 machine tools, the profits at both the locations are identical.

Hence, at 120 machine tools, the profits at both the locations are identical

Answer 7

Chapter 8, Problem 19P

a)

Summary Introduction

To determine: The output at which two locations will have same profit.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

Answer 8

a)

Expert Solution

Answer to Problem 19P

At 120 machine tools, the profits at both the locations are identical.

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which two locations will have same profit:

Denote the volume of production of machine tools as “x”.

Given the selling price of each machine tool at $29,000, the total revenues, denoted by TR are

TR=$29,000x (1)

Given the B location has a fixed cost of $800,000 per year and a variable cost of $14,000, express the total cost TC_B for a production volume of “x” machine tools as follows.

TCB=$14,000x+$800,000 (2)

Given the Mc location has a fixed cost of $920,000 per year and a variable cost of $13,000, express the total cost TC_Mc for a production volume of “x” machine tools as follows.

TCMc=$13,000x+$920,000 (3)

Calculate the volume of output “x” where both locations have the same profit

$29,000×x−$14,000×x−$800,000=$29,000−$13,000×x−$920,000($29,000−$14,000)×x−$800,000=($29,000−$13,000)×x−$920,000$1,000×x=$120,000x=120 units

Equating the equations and solving for x, the volume of production of 120 machine tools, the profits at both the locations are identical.

Hence, at 120 machine tools, the profits at both the locations are identical

Answer 13

b)

Summary Introduction

To determine: The output at which location B will have high profit than location Mc.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

b)

Expert Solution

Answer to Problem 19P

Upto production level of 120 units Location B will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location B will have high profit than location Mc:

To find out at what range of output the location B will have higher profits compared to the location Mc draw graphs of the two cost functions TC_B and TC_Mc besides the revenues TR as shown below.

EBK PRINCIPLES OF OPERATIONS MANAGEMENT, Chapter 8, Problem 19P

The graph lines for TC_B and TC_Mc intersect at a production volume of 120 machine tools.

The location B is cost effective up to a production volume of 120 units. Therefore, profitability also will be higher at location B upto a production level of 120 units.

Hence, upto production level of 120 units Location B will have high profit.

Answer 14

b)

Summary Introduction

To determine: The output at which location B will have high profit than location Mc.

Introduction: Location is one of the important element for a business that controls the cost and expenses. Location strategies support in framing other strategies for a firm where optimal location point will provide competitive advantage to a firm.

Answer 15

b)

Expert Solution

Answer to Problem 19P

Upto production level of 120 units Location B will have high profit.

Answer 16

b)

Expert Solution

Answer 17

b)

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location B will have high profit than location Mc:

To find out at what range of output the location B will have higher profits compared to the location Mc draw graphs of the two cost functions TC_B and TC_Mc besides the revenues TR as shown below.

EBK PRINCIPLES OF OPERATIONS MANAGEMENT, Chapter 8, Problem 19P

The graph lines for TC_B and TC_Mc intersect at a production volume of 120 machine tools.

The location B is cost effective up to a production volume of 120 units. Therefore, profitability also will be higher at location B upto a production level of 120 units.

Hence, upto production level of 120 units Location B will have high profit.

Answer 20

c)

Summary Introduction

To determine: The output at which location Mc will have high profit than location B.

c)

Expert Solution

Answer to Problem 19P

For production level above 120 units Location Mc will have high profit.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location Mc will have high profit than location B:

For production volumes above 120 machine tools, the Mc location is preferable as costs are lower and the profitability improves.

Hence, above production level of 120 units Location Mc will have high profit.

Answer 21

c)

Summary Introduction

To determine: The output at which location Mc will have high profit than location B.

Answer 22

c)

Expert Solution

Answer to Problem 19P

For production level above 120 units Location Mc will have high profit.

Answer 23

c)

Expert Solution

Answer 24

c)

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation to find the output at which location Mc will have high profit than location B:

For production volumes above 120 machine tools, the Mc location is preferable as costs are lower and the profitability improves.

Hence, above production level of 120 units Location Mc will have high profit.

Answer 27

d)

Summary Introduction

To determine: The break-even point of each location.

d)

Expert Solution

Answer to Problem 19P

The break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation of break-even point:

Calculate the break even point for Bhnm location by linking equations (1) and (2), since at the break even point the total revenues are same as total costs.

14,000×x+800,000=29,000×x15,000x=800,000x=800,00015,000=53.3

Ignoring the fractional part, the location B breaks even at a production volume of 54 machine tools.

Similarly calculate the break even point for Mckny location by linking equations (1) and (3), since at the break even point the total revenues are same as total costs.

13,000×x+920,000=29,000×x16,000x=920,000x=920,00016,000x=57.5

Ignoring the fractional part, the Mc location breaks even at a production volume of 58 machine tools. Breakeven production volumes for both the locations are much below the crossover production volume of 120 machine tools.

Hence, the break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Answer 28

d)

Summary Introduction

To determine: The break-even point of each location.

Answer 29

d)

Expert Solution

Answer to Problem 19P

The break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.

Answer 30

d)

Expert Solution

Answer 31

d)

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Given information:

Site	Fixed cost per year	Variable cost per year
B	$800,000	$14,000
Mc	$920,000	$13,000

Calculation of break-even point:

Calculate the break even point for Bhnm location by linking equations (1) and (2), since at the break even point the total revenues are same as total costs.

14,000×x+800,000=29,000×x15,000x=800,000x=800,00015,000=53.3

Ignoring the fractional part, the location B breaks even at a production volume of 54 machine tools.

Similarly calculate the break even point for Mckny location by linking equations (1) and (3), since at the break even point the total revenues are same as total costs.

13,000×x+920,000=29,000×x16,000x=920,000x=920,00016,000x=57.5

Ignoring the fractional part, the Mc location breaks even at a production volume of 58 machine tools. Breakeven production volumes for both the locations are much below the crossover production volume of 120 machine tools.

Hence, the break-even point for location B is 54 machine tools and for location Mc is 58 machine tools.