Assignment:
A firm decides whether to produce products by an onshore plant or an offshore plant. The fixed cost and the variable cost of the onshore plant are dollar 40,000 dollar 1.2, while the fixed cost and the variable cost of the offshore plant dollar 30,000 and dollar 1.0 the variable cost includes all costs related to production and (suppose transportation). The capacities of the onshore plant and the offshore plant are 20,000 and 16,000 respectively. The demand in the next season is estimated to be high, 20,000, with the chance 50percentage, and be low, 18.000, with the chance 50 percentage. The marginal revenue of each unit of product is dollar 5.
- Which plant should the firm choose?
Provide complete and step by step solution for the question and show calculations and use formulas.