An operations manager has narrowed down the search for a new plant to three locations. Fixed and variable costs follow.
Plot the total cost curves in the chart provided and identify the range over which each location would be best. Then use break-even analysis to calculate exactly the break-even quantity that defines each range.
Which of the following statements is correct?
◦ The break-even quantity between C and B is more than 3000 units.
◦ The break-even quantity between A and B is less than or equal to 500 units.
◦ Location A becomes the most expensive place to produce at volumes in excess of 1500.
◦ By inspection, it is apparent that at least two different sites will be the best places to produce at dramatically different output volumes.
Plant
Plant
Plant
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