Problem:
Victoria Corp, a producer of machine tools, wants to move to a larger site in Houston area. Two alternative locations have been identified, Sugarland and Cinco Ranch. Sugarland would have fixed costs of $800,000 per year and variable costs of $14,000 per standard unit produced. Cinco Ranch would have annual fixed costs of $920,000 and variable costs of $13,000 per standard unit. The finished items sell for $29,000 each.
Required:
Question 1) At what volume of output would the two locations have the same profit?
Question 2) For what range of output would each of the two locations preferred? Solve the problem and show all work.