PowerBright must decide between two locations on which to build a new power station to provide 60 megawatt-hours of electricity a month. Location A would have a variable cost of $1,000 per megawatt-hour and location B would have a variable cost of $1,500 per megawatt-hour. A power station at location A would also require a fixed cost of $50,000 a month, although an estimate of the monthly fixed cost at location B has not been made available yet, due to ongoing negotiations with a landowner there. At what fixed cost for location B would PowerBright be indifferent to the choice of either of these two locations?

PowerBright must decide between two locations on which to build a new power station to provide 60 megawatt-hours of electricity a month. Location A would have a variable cost of $1,000 per megawatt-hour and location B would have a variable cost of $1,500 per megawatt-hour. A power station at location A would also require a fixed cost of $50,000 a month, although an estimate of the monthly fixed cost at location B has not been made available yet, due to ongoing negotiations with a landowner there. At what fixed cost for location B would PowerBright be indifferent to the choice of either of these two locations?

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

ChapterMB: Model-building Problems

Section: Chapter Questions

Problem 18M

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