Answered: Hyundai Motors is considering three…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Question

Hyundai Motors is considering three sites—A, B, and

C—at which to locate a factory to build its new-model automo-
bile, the Hyundai Sport C150. The goal is to locate at a minimum-
cost site, where cost is measured by the annual fixed plus variable

costs of production. Hyundai Motors has gathered the following
data:

SITE

ANNUALIZED
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 Sport C150s
at the new plant each year, but, thus far, that is the extent of its
knowledge about production plans.
a) For what values of volume, V, of production, if any, is site C a
recommended site?
b) What volume indicates site A is optimal?
c) Over what range of volume is site B optimal? Why?

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