Illustrate range of product would each plant be preferred

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Q. A soft drink maker wants to expand into a neighbouring country. They want the product bottled in that country to avoid political issues also to enhance the local image of the product. They have identified two options for the expansion. The first is to build a highly automated process. The economies of scale would allow them to produce a can of soda for $0.04 also the distribution costs would be $0.02 per can. This facility would cost $1 million per year in fixed costs. The second option would be to build a semi-automated plant that would cost $650,000 per year in fixed costs. Explain however, the cost to produce a can would be $0.07 also the distribution cost would be $0.04 per can. Over Illustrate what range of product would each plant be preferred?

Reference no: EM1377965

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