Question: Coffee Bloom Caf , Inc. is thinking on increasing their capacity due to the expanding market demand. There are three options: Option 1 : setting

Coffee Bloom Caf, Inc. is thinking on increasing their capacity due to the expanding market demand. There are three options:
Option 1: setting up a new caf in a different location A. The costs are estimated as $60,000 per year for fixed cost and $7 as unitary variable cost. This option would lead to the shutdown of the current caf.
Option 2: setting up a new caf in a different location B with estimated fixed cost as $80,000 per year and $5 as unitary variable cost. This option would lead to the shutdown of the current caf.
Option 3: increasing the current capacity in the same location, enabling an additional service line. This option would yield fixed costs of $40,000 and variable cost of $8.5.
1. If Coffee Bloom Caf, Inc. expects to sell 12,000 units, which option should they take? Show your work to calculate total costs in the answer.

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