Chemco operates two plants A and B, which produce the same product. The capacity of plant A is $60,000 gallons while that of B is $80,000 gallons. The annual fixed cost of plant A is $2600000 per year and the variable cost is $32 per gallon. The corresponding values for plant B are $2800000 and $39 per gallon. At present, plants A and B are being operated at 35% and 40% of capacity, respectively.
a. What would be the total cost of production of plants A and B?
b. What would be the total cost and the average unit cost of the total output of both plants?
c. What would be the total cost to the company and cost per gallon if all production were transferred to plant A?
d. What would be the total cost to the company and cost per gallon if all production were transferred to plant B?