A small producer of machine tools wants to move to a larger building, and has identified two alternatives. Location A has annual fixed costs of $115,000 and variable costs of $9,000 per unit; location B has annual fixed costs of $315,000 and variable costs of $5,000 per unit. The finished items sell for $14,000 each.
a) At what volume of output would the two locations have the same total cost?
b) For what range of output would location A be superior?
c) For what range would B be superior?