Quatro Hermanas, Inc. is investigating implementing some new production machinery as part of its operations. Three alternatives have been identified, and they have the following fixed and variable costs: Annual Annual Variable Alternative Fixed Costs Costs per Unit A $100,000 $20.00 B $200,000 $5.00 C $150,000 $7.50
a. Determine the ranges of production (units produced per year) over which each alternative would be recommended up to 30,000 units per year.
b. Depict your solution from part (a) graphically, putting Total Cost ($) on the y-axis and unit produced per year on the x-axis, to show:
i. Accurate total cost lines for each alternative
ii. Any relevant breakeven, or crossover points in terms of costs between the alternatives.
iii. Ranges of annual production where each alternative is preferred. iv. Clearly label your axes