Which plant offers the lowest total cost in the case below(and why)?
A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs 0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.35 per unit. If demand is expected to be 10 million units.
A. . Plant A, because it is cheaper than Plant B for all volumes under 10,000,000 units B. Plant B, because it is cheaper than Plant A for all volumes over 10,000,000 units C. Plant A, because it is cheaper than Plant B for all volumes D. Plant B, because it has the lower variable cost per unit E. Neither Plant A nor Plant B, because the crossover point is at 10 million units