Question: 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 $100,000 and variable costs of $13,000 per unit; location B has annual fixed costs of $300,000 and variable costs of $8,000 per unit. The finished items sell for $18,000 each.
1) At what volume of output would the two locations have the same total cost?
Volume of output ________ units
2) For what range of output would location A be superior?
Range of output 0 to _____
3) For what range would B be superior?
Range of output _______ or more