You are charged with finding a location for a new factory and are cons

Question

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You are charged with finding a location for a new factory and are considering two locations. You have a budget for construction of a new building or renovation of an existing structure, as well as for operating costs. The urban location will require only renovation, which would cost 40% less than building the rural location, where new construction will be necessary. Labor costs at the urban location will run an average of 35% higher than those at the rural location. The maximum operating budget for the rural location is $480,000. Find the maximum cost of construction for which the two locations have equal budgets and the change in the cost of the urban location if the labor budget is reduced by $200,000 and the construction budget is increased by the same amount.

pudu · Answer

i am getting 224,000 as the cost under equal budget. .4 construction=.35 labour is the way i took. please help me to identify the error

pablovaldesvega · Answer

can someone please provide an explanation?

Sajjad1994 · Answer

Official Explanation

The construction budget for the urban site is 40% of c, the construction budget for the rural site. The operating budget for the urban site is 135% of b, the operating budget for the rural site, and b is a maximum of $480,000. If the maximum total budgets are equal, 0.4c + 1.35b = c + b.

Simplifying 0.4c + 1.35b = c + b gives you 0.35b = 0.6c. The maximum value of b is $480,000, so 0.35 × $480,000 = 0.6c, and c = (0.35 × $480,000)/0.6 = $280,000.

If $200,000 is shifted from labor to construction, b = $280,000, and c = $480,000. The urban budget becomes 0.4c + 1.35b = 0.4($480.000) + 1.35($280,000) = $570,000. The original budget was 0.4($280,000) + 1.35($480,000) = $760,000, so the change is $760,000 – $570,00 = $190,000.

pablovaldesvega · Answer

"The urban location will require only renovation, which would cost 40% less than building the rural location" -> Doesn't that make:  renovation_urban=0.6*constuction_rural  ??

pudu · Answer

i still have issue. if we take in financial terms operating cost is only for labour, not to the construction. Earlier i took 480,000 as sum of both construction and labour. Now, when i reread the question i understood it is only labour. Then how we equate construction and lavour cost to 480,000.Please help me.

Sajjad1994 · Answer

This question is not clear in it language and is ambiguous. I am retiring it. Sorry for the inconvenience.

bumpbot · Answer

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Maximum cost of construction under equal budgets	Change in urban budget after $200,000 shift
		$190,000
		$200,000
		$250,000
		$260,000
		$280,000
		$310,000

You are charged with finding a location for a new factory and are cons

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