Question

A paint manufacturing company has three factories located in France, Germany, and Spain. The productivity data of the factories are as follows:
Factory Location Amount of Paint Produced(US Gallons) Total Input Cost (USD)

Spain 4,600,000,000 $5,250,000

Germany 5,500,000,000 $5,250,000

France 4,000,000,000 $3,500,000


A. Germany is lower than that of the factory in Spain.

B. Spain is higher than that of the factory in France.

C. France is higher than that of the factory in Spain.

D. France is lower than that of the factory in Germany.

Answer 1

Answer:

Options A, B and D

Explanation:

To determine which country has the highest/lowest cost, we would compute the cost per unit(US Gallon) of paint produced.

For Spain,

Amount of Paint Produced(US Gallons) = 4,600,000,000,

Cost = $5,250,000

Cost per unit =  $\frac{5250000}{4,600,000,000}$

                      = $0.001141 Per US Gallon

For Germany,

Amount of Paint Produced(US Gallons)= 5,500,000,000,

Cost = $5,250,000

Cost per unit = $\frac{5250000}{5500000000}$

                       = $0.000955 Per US Gallon

Amount of Paint Produced(US Gallons) = 4,000,000,000,

Cost = $3,500,000

Cost per unit = $\frac{3500000}{4000000000}$

                      = $0.000875 Per US Gallon

From the above analysis, the highest cost is incurred in Spain and the lowest in France.

Hence,

Option A; Germany is lower than that of the factory in Spain is right.

Option B; Spain is higher than that of the factory in France is right.

Option C; France is higher than that of the factory in Spain is wrong.

Option D; France is lower than that of the factory in Germany is right.

As such, only option C is wrong.