Site annual fixed cost variable cost per auto produced

Reference no: EM13318402

Audi Motors is considering three sites – A, B, and C, at which to locate a factory to build it’s new model automobile, the Audi SUV XL500. The goal is to locate at a minimum cost site, where cost is measured by the annual fixed plus variable costs of production. Audi Motors has gathered the following data:

Site Annual Fixed Cost Variable Cost per Auto Produced

A $10,000,000 $2,500

B $20,000,000 $2,000

C $25,000,000 $1,000

The firm knows it will produce between 0 and 60,000 SUV XL500s at the new plant each year, but, this far, that is the extent of its knowledge about production plans, For what values of volume, V, of production, if any, is site C a recommended site?

Reference no: EM13318402

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