Your insurance firm processes claims through its two facilities: facility
A and facility B. Each month, facility A handles 9,000 claims and incurs in $162,000 fixed costs and $180,000 in variable costs. Each month, facility B handles 11,000 and incurs $95,000 in fixed costs and $143,000 in variable costs.
Hint: Be careful not to commit the sunk-cost fallacy in your analysis.
If you anticipate a moderate decrease in the number of claims, you should lay off workers in facility _____ in order to decrease costs.
ANSWER OPTIONS: A, or B
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