A firm is deciding between two location alternatives, Chicago and Dallas. Chicago would result in annual fixed costs of $70,000, labor costs of $8 per unit, material costs of $12 per unit, transportation costs of $18 per unit, and revenue per unit of $60. Dallas would have annual fixed costs of $90,000, labor costs of $7 per unit, material costs of $11 per unit, transportation costs of $16 per unit, and revenue per unit of $55. A) At an annual volume of 10,000 units, which location would yield the higher profit? B) At what annual volume would management be indifferent between the two alternatives in terms of annual profits?

A firm is deciding between two location alternatives, Chicago and Dallas. Chicago would result in annual fixed costs of $70,000, labor costs of $8 per unit, material costs of $12 per unit, transportation costs of $18 per unit, and revenue per unit of $60. Dallas would have annual fixed costs of $90,000, labor costs of $7 per unit, material costs of $11 per unit, transportation costs of $16 per unit, and revenue per unit of $55. A) At an annual volume of 10,000 units, which location would yield the higher profit? B) At what annual volume would management be indifferent between the two alternatives in terms of annual profits?

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 5P: Hudson Corporation is considering three options for managing its data warehouse: continuing with its...

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A firm is trying to decide between two location alternatives, Albany and Baltimore. Albany would result in annual fixed costs of $60,000, labor costs of $7 per unit, material costs of $10 per unit, transportation costs of $15 per unit, and revenue per unit of $50. Baltimore would have annual fixed costs of $80,000, labor costs of $6 per unit, material costs of $9 per unit, transportation costs of $14 per unit, and revenue per unit of $48. (A) At an annual volume of 9,000, which would yield the higher profit? (B) At what annual volume would management be indifferent between the two alternatives in terms of annual profits?
A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs $0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.34 per unit. If annual demand is expected to be 9 million units, which plant offers the lowest total cost? Plant B, because it has the lower variable cost per unit. Plant A, because it is cheaper than Plant B for all volumes below 10,000,000 units. Plant A, because it is cheaper than Plant B for all volumes. Plant B, because it is cheaper than Plant A for all volumes below 10,000,000 units. Neither Plant A nor Plant B, because the crossover point is at 9 million units.
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