James and John have been producing cricket bats for five years. They have been granted the contract by the CPL to make their cricket bats and due to their recent success they have to move to a larger facility. They have located two alternative facilities. Facility 1 has a fixed cost of $500,000 per year, with a variable cost of $25 per unit. Facility 2 has a fixed cost of $800,000 per year, but a variable cost of $22 per unit.
i. Write out the equation for total cost for each site.
ii. At what volume of output would the two locations have the same total cost?
iii. For what range of output would Site 1 be superior?
iv. For what range of output would Site 2 be superior?