Wiebe Trucking, Inc., is planning a new warehouse to serve the west. Denver, San
ID: 363938 • Letter: W
Question
Wiebe Trucking, Inc., is planning a new warehouse to serve the west. Denver, Santa Fe, and Salt Lake City are under consideration. For each location, annual fixed costs (rent, equipment, and insurance) and average variable costs per shipment (labor, transportation, and utilities) are listed in the following table. Sales projections range from 400,000 to 500,000 shipments per year Annual Fixed Variable Costs per Location Salt Lake City Denver Santa Fe Costs $4,800,0 $4,500,000 $3,500,000 Shipment S4.55 S6.30 $7.60 00 a. Plot the total cost curves for all of the locations on a single graph. To ensure that you are able to clearly see the intersection of the lines, start your cost curves at 0 shipments (the y-intercept) and end your lines at a volume of 800 thousand shipments. 1.) Using the line drawing tool, plot the cost curve for Salt Lake City and label it properly 2.) Using the line drawing tool, plot the cost curve for Denver and label it properly 3.) Using the line drawing tool, plot the cost curve for Santa Fe and label it properly. Carefully follow the instructions above, and only draw the required objects. 600 800 Shipments, thousands Click the graph, choose a tool in the palette and follow the instructions to create your graph.Explanation / Answer
given,
LOCATION
FIXED COST
VARIABLE COST PER UNIT
Salt lake city
$4,800,000
$4.55
Denver
$4,500,000
$6.30
Santa Fe
$3,500,000
$7.60
Total Cost
Salt lake city
Units
Fixed Cost
Variable cost
total cost
0
$4,800,000
0
$4,800,000
200000
$4,800,000
910000
$5,710,000
250000
$4,800,000
1137500
$5,937,500
300000
$4,800,000
1365000
$6,165,000
400000
$4,800,000
1820000
$6,620,000
450000
$4,800,000
2047500
$6,847,500
500000
$4,800,000
2275000
$7,075,000
550000
$4,800,000
2502500
$7,302,500
600000
$4,800,000
2730000
$7,530,000
650000
$4,800,000
2957500
$7,757,500
700000
$4,800,000
3185000
$7,985,000
750000
$4,800,000
3412500
$8,212,500
800000
$4,800,000
3640000
$8,440,000
Denver
Units
Fixed Cost
Variable cost
total cost
0
$4,500,000
$0
$4,500,000
200000
$4,500,000
$1,260,000
$5,760,000
250000
$4,500,000
$1,575,000
$6,075,000
300000
$4,500,000
$1,890,000
$6,390,000
400000
$4,500,000
$2,520,000
$7,020,000
450000
$4,500,000
$2,835,000
$7,335,000
500000
$4,500,000
$3,150,000
$7,650,000
550000
$4,500,000
$3,465,000
$7,965,000
600000
$4,500,000
$3,780,000
$8,280,000
650000
$4,500,000
$4,095,000
$8,595,000
700000
$4,500,000
$4,410,000
$8,910,000
750000
$4,500,000
$4,725,000
$9,225,000
800000
$4,500,000
$5,040,000
$9,540,000
Santa Fe
Units
Fixed Cost
Variable cost
total cost
0
$3,500,000
0
$3,500,000
200000
$3,500,000
1520000
$5,020,000
250000
$3,500,000
1900000
$5,400,000
300000
$3,500,000
2280000
$5,780,000
400000
$3,500,000
3040000
$6,540,000
450000
$3,500,000
3420000
$6,920,000
500000
$3,500,000
3800000
$7,300,000
550000
$3,500,000
4180000
$7,680,000
600000
$3,500,000
4560000
$8,060,000
650000
$3,500,000
4940000
$8,440,000
700000
$3,500,000
5320000
$8,820,000
750000
$3,500,000
5700000
$9,200,000
800000
$3,500,000
6080000
$9,580,000
The graph is plotted using total cost column of three places. The total cost is obtained by adding fixed cost and total variable cost. Variable cost is computed by multiplying per unit variable cost * units.
given,
LOCATION
FIXED COST
VARIABLE COST PER UNIT
Salt lake city
$4,800,000
$4.55
Denver
$4,500,000
$6.30
Santa Fe
$3,500,000
$7.60
Total Cost
Salt lake city
Units
Fixed Cost
Variable cost
total cost
0
$4,800,000
0
$4,800,000
200000
$4,800,000
910000
$5,710,000
250000
$4,800,000
1137500
$5,937,500
300000
$4,800,000
1365000
$6,165,000
400000
$4,800,000
1820000
$6,620,000
450000
$4,800,000
2047500
$6,847,500
500000
$4,800,000
2275000
$7,075,000
550000
$4,800,000
2502500
$7,302,500
600000
$4,800,000
2730000
$7,530,000
650000
$4,800,000
2957500
$7,757,500
700000
$4,800,000
3185000
$7,985,000
750000
$4,800,000
3412500
$8,212,500
800000
$4,800,000
3640000
$8,440,000
Denver
Units
Fixed Cost
Variable cost
total cost
0
$4,500,000
$0
$4,500,000
200000
$4,500,000
$1,260,000
$5,760,000
250000
$4,500,000
$1,575,000
$6,075,000
300000
$4,500,000
$1,890,000
$6,390,000
400000
$4,500,000
$2,520,000
$7,020,000
450000
$4,500,000
$2,835,000
$7,335,000
500000
$4,500,000
$3,150,000
$7,650,000
550000
$4,500,000
$3,465,000
$7,965,000
600000
$4,500,000
$3,780,000
$8,280,000
650000
$4,500,000
$4,095,000
$8,595,000
700000
$4,500,000
$4,410,000
$8,910,000
750000
$4,500,000
$4,725,000
$9,225,000
800000
$4,500,000
$5,040,000
$9,540,000
Santa Fe
Units
Fixed Cost
Variable cost
total cost
0
$3,500,000
0
$3,500,000
200000
$3,500,000
1520000
$5,020,000
250000
$3,500,000
1900000
$5,400,000
300000
$3,500,000
2280000
$5,780,000
400000
$3,500,000
3040000
$6,540,000
450000
$3,500,000
3420000
$6,920,000
500000
$3,500,000
3800000
$7,300,000
550000
$3,500,000
4180000
$7,680,000
600000
$3,500,000
4560000
$8,060,000
650000
$3,500,000
4940000
$8,440,000
700000
$3,500,000
5320000
$8,820,000
750000
$3,500,000
5700000
$9,200,000
800000
$3,500,000
6080000
$9,580,000
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