The annual fixed costs and unit variable (transportation) costs for three facili

Question

The annual fixed costs and unit variable (transportation) costs for three facility location alternatives (A, B, and C) are as follows Variable FacilityAnnTransportation Location Fixed CostCost per Ton $30,000 $150,000 $300,000 S500 $150 +Sm $80 - Sn Example: variable Cost for Location B-$150 + Sn-S 150 + $45 = $195 per ton Variable Cost for Location C $80- Sn $80-$45 S35 per ton Use your n (the summation of all digits of your ID number) to answer the following questions: Round your non-integer answers to four decimal places What is the break-even point (tons of shipment per year) between locations A and B? A. B. What is the break-even point (tons of shipment per year) between locations B and C? C. What is the total cost of the best facility location alternative for 700 tons of annual shipment? The best facility location alternative achieves the minimum total cost.

Explanation / Answer

N= 48

A:

Annual Fixed cost = 30,000 $

Variable cost per ton = 500 $

B

Annual Fixed cost = 150,000 $

Variable cost per ton = 150 + 48 = 198 $

C

Annual Fixed cost = 300,000 $

Variable cost per ton = 80 – 48 = 32 $

A. Breakeven point between A and B = (FC of B – FC of A)/(VC of A – VC of B)

= (150000 – 30000)/(500-198)

= 39.73 = 40 units

B. Between B and C = (FC of C – FC of B)/(VC of B – VC of C)

= 150,000/166 = 903.61 = 904 units

C. For 700 unit’s best location will be B

Total cost = FC + VC*700 = 150,000 + 700*198 = 288600 $

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