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Excel Products Is Planning a New Warehouse to Serve the Southeast

Question 62

Multiple Choice

Excel Products is planning a new warehouse to serve the Southeast. Locations A, B, and C are under consideration. Fixed and variable costs follow:
 Location  Fixed Cost  per Year  Variable Cost  per Unit A$2,500,000$19 B1,500,0007C2,000,0009\begin{array} { | l | l | l | } \hline \text { Location } & \begin{array} { l } \text { Fixed Cost } \\\text { per Year }\end{array} & \begin{array} { l } \text { Variable Cost } \\\text { per Unit }\end{array} \\\hline \mathrm { A } & \$ 2,500,000 & \$ 19 \\\mathrm {~B} & 1,500,000 & 7 \\\mathrm { C } & 2,000,000 & 9 \\\hline\end{array}
Plot the total cost curves in the chart provided below, and identify the range over which each location would be best. Then use break- even analysis as necessary to calculate exactly the break- even quantity that defines each range.  Excel Products is planning a new warehouse to serve the Southeast. Locations A, B, and C are under consideration. Fixed and variable costs follow:   \begin{array} { | l | l | l | }  \hline \text { Location } & \begin{array} { l }  \text { Fixed Cost } \\ \text { per Year } \end{array} & \begin{array} { l }  \text { Variable Cost } \\ \text { per Unit } \end{array} \\ \hline \mathrm { A } & \$ 2,500,000 & \$ 19 \\ \mathrm {~B} & 1,500,000 & 7 \\ \mathrm { C } & 2,000,000 & 9 \\ \hline \end{array}   Plot the total cost curves in the chart provided below, and identify the range over which each location would be best. Then use break- even analysis as necessary to calculate exactly the break- even quantity that defines each range.    Which of the following statements is correct? A)  Location B is best over all volume levels. B)  The total cost of location A, if the volume is 250,000 units, is over $7,000,000. C)  Location A is the best one if volumes are quite high. D)  The break- even quantity between A and B is more than 75,000 units but less than 200,000 units.
Which of the following statements is correct?


A) Location B is best over all volume levels.
B) The total cost of location A, if the volume is 250,000 units, is over $7,000,000.
C) Location A is the best one if volumes are quite high.
D) The break- even quantity between A and B is more than 75,000 units but less than 200,000 units.

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