A manufacturer of industrial machines wants to move to a larger plant, and has identified two alternatives. Location A has annual fixed cost of $800,000 and variable cost of $ 14,000 per unit; location B has annual fixed cost of $920,000 and variable cost of $12,000 per unit.
a. At what quantity of output would the two locations have the same total cost?
b. For what range of output would location A be superior? For what range would B be superior (i.e., have lower total annual cost)?