[Step-by-Step] Kitchen Helper Company has decided to produce and sell food blenders and is considering three different types of production facilities ("plants").
Question: Kitchen Helper Company has decided to produce and sell food blenders and is considering three different types of production facilities ("plants"). Plant A is a labor-intensive facility, employing relatively little specialized capital equipment. Plant B is a semi-automated facility that would employ less labor than A but would also have higher capital equipment costs. Plant C is a completely automated facility using much more high-Cost, high-technology capital equipment and even less labor than B. Information about the operating costs and production capacities of these three different types of plants is shown in the following table.
- Determine the average total cost schedules for each plant type for annual outputs of 25,000, 50,000, 75,000, . . . , 350,000. For output levels beyond the capacity of a given plant, assume that multiple plants of the same type are built. For example, to produce 200,000 units with Plant A, three of these plants would be built.
- Based on the cost schedules calculated in Part (a), construct the long run average total cost schedule for the production of blenders.
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