Ching Chang Kau Considering Opening New Foundry Denton Texas Edwardsville Illinois Fayette Q34189604

Ching-Chang Kau is considering opening a new foundry in Denton,Texas; Edwardsville, Illinois; or Fayetteville, Arkansas, toproduce high-quality rifle sights. He has assembled the followingfixed-cost and variable costs data:

Location Fixed cost per year Per-Unit costs Material VariableLaborOverhead

Denton $200,000 $0.2 $0.4 $0.4

Ewardsville $180,000 $0.25 $0.75 $0.75

Fayetteville $170,000 $1 $ 1 $1

a)Over what range of annual volume is each facility going tohave a competitive advantage?

b)What is the volume at the intersection of the Edwardsville andFayetteville cost lines?

Expert Answer

Denton

Fixed cost = 200,000

Variable cost = .2 + .4 + .4 = 1 $

Ewardsville

Fixed cost = 180,000

Variable cost = .25 + .75 + .75 =