Question: [Cost-Volume Analysis] A small producer of music boxes wants to move to a larger facility. Two alternative facilities have been found. Site 1 lies a fixed cost of $500,000 per year, with a variable cost of $25 per unit. Site 2 has a fixed cost of $800,000 per year, but a variable cost of $22 per unit.
Write out the equation for total cost for each site.
At what volume of output would the two locations have the same total cost?
For what range of output would Site 1 be superior?
For what range of output would Site 2 be superior?