A newly formed company must decide on a plant location. There are two alternatives under consideration: locate near the major raw materials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than locating near the market, but the owners believe that there would be a loss in sales volume because customers tend to favour local suppliers. Revenue per unit will be $160 in either case. Annual fixed costs ($ millions) Variable cost per unit Expected annual demand (units) Near raw materials Near customers 1. Using the above given information, determine the profits for each alternative. (Negative answers should be indicated by a minus sign.) $ $ 2. Which location would produce greater profit? Near Raw Materials $0.90 $ 40 8,600 ONear raw materials ONear customers Near Customers $1.00 $ 45 13,300

A newly formed company must decide on a plant location. There are two alternatives under consideration: locate near the major raw materials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than locating near the market, but the owners believe that there would be a loss in sales volume because customers tend to favour local suppliers. Revenue per unit will be $160 in either case. Annual fixed costs ($ millions) Variable cost per unit Expected annual demand (units) Near raw materials Near customers 1. Using the above given information, determine the profits for each alternative. (Negative answers should be indicated by a minus sign.) $ $ 2. Which location would produce greater profit? Near Raw Materials $0.90 $ 40 8,600 ONear raw materials ONear customers Near Customers $1.00 $ 45 13,300

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...

See similar textbooks

Related questions

Q: Which one of the following statement is not correct? Group of answer choices -Opportunity costs are…

A: Managerial accounting is helpful in decision-making related to a product whether the product should…

Q: Which of the following is true if a company can accept a special order without affecting its regular…

A: Any order from a customer for products or services that are not regularly handled by a company is…

Q: Differential Costs and Sunk Costs Required: 1. What is the incremental manufacturing cost incurred…

A: Hey, since there are multiple sub-parts posted, we will answer the three sub-parts. If you want any…

Q: When making special order decisions, if there is not available capacity to complete the special…

A: When making special order decisions, managers need to consider various factors before accepting or…

Q: A growing firm is contemplating switching from a FIFO to a LIFO cost flow assumption forinventories…

A: In case of rising prices, when the LIFO is applied the cost of goods sold will increase (as the…

Q: Need Solution with Calculation of this Question pls. Provide

A: Approach to solving the question: Detailed explanation: Variable Costing and the Contribution…

Q: Which TWO of the following statements about life-cycle costing are true? Specific product models…

A: Life cycle costing is a technique of cost accumulation of a product over its life cycle. Now these…

Q: d. If the negotiated price approach is used, what would be the range of acceptable transfer prices?…

A: The Transfer Pricing between the divisions should be such that company will not incur any decrease…

Q: $4 per unit. The company has the option to purchase the component for $20 per unit. Prepare a…

A: Differential analysis: An analysis which only considers changes in income and expenses of an entity…

Q: Construct an appropriate spreadsheet model to find the profit based on a given production level and…

A: A break-even units range is the range of units in which there can be at any point of units the…

Q: Suppose that a manufacturer can produce a part for $8.00 with a fixed cost of $6,000. Alternately,…

A: Make or buy decision is an important managerial decision, in this decision management need to…

Question

A newly formed company must decide on a plant location. There are two alternatives under consideration: locate near the major raw
materials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than locating
near the market, but the owners believe that there would be a loss in sales volume because customers tend to favour local suppliers.
Revenue per unit will be $160 in either case.
Annual fixed costs ($ millions)
Variable cost per unit
Expected annual demand (units)
Near raw materials
Near customers
1. Using the above given information, determine the profits for each alternative. (Negative answers should be indicated by a minus
sign.)
64
2. Which location would produce greater profit?
O Near raw materials
O Near customers
Near Raw
Materials
$0.90
$ 40
8,600
Near
Customers
$1.00
$ 45
13,300

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction:-

VIEW

Step 2: Calculation:-

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

As a manager, you have to choose between two options for new production equipment. Machine A will increase fixed costs by a substantial margin but will produce greater sales volume at the current price. Machine B will only slightly increase fixed costs but will produce considerable savings on variable cost per unit. No additional sales are anticipated if Machine B is selected. What are the relative merits of both machines, and how could you go about analyzing which machine is the better investment for the company in terms of both net operating income and break-even?
The Shine Company, which manufactures projection equipment, is ready to introduce a new line of portable projectors. The following data are available for a proposed model: Variable manufacturing costs Applied fixed manufacturing overhead Variable selling and administrative costs Applied fixed selling and administrative costs What price will the company charge if the firm uses cost-plus pricing based on total variable cost and a markup percentage of 235%? Multiple Choice $1,565.25. $1,700.25. $1,835.25. $2,060.25. None of these answer choices is correct. $ 440 220 175 190
Solve 2, the first answer is the wrong. Find the lowest acceptable transfer price.
Ouzts Corporation is considering Alternative A and Alternative B. Costs associated with the alternatives are listed below: Alternative Alternative A В Materials costs $41,000 $37,900 $13,300 $15,300 $57,100 $37,900 $13,300 $22,500 Processing costs Equipment rental Occupancy costs What is the financial advantage (disadvantage) of Alternative B over Alternative A?
Crane Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Capital-Intensive $6.00 per unit $7.00 per unit $4.00 per unit $3,200,000 Crane' market research department has recommended an introductory unit sales price of $40.00. The selling expenses are estimated to be $622,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. 1. Capital-intensive manufacturing method. 2. Labor-intensive manufacturing method. Break-even point in units Labor-Intensive $7.00 per unit $10.00 per unit $5.50 per unit Calculate the estimated break-even point in annual unit sales of the new product if Crane Company uses the: $2,028,500 Capital-Intensive Labor-Intensive
Costs associated with two alternatives, code-named Q and R, being considered by Albiston Corporation are listed below: Alternative Q Alternative R Supplies costs $ 74,000 $ 74,000 Power costs $ 34,200 $ 33,400 Inspection costs $ 27,000 $ 33,400 Assembly costs $ 39,000 $ 39,000 Required: a. Which costs are relevant and which are not relevant in the choice between these two alternatives? b. What is the differential cost between the two alternatives?
Sagar
The clock division of Control Central Corporation manufactures clocks and then sells them to customers for $10 per unit. Its variable cost is $4 per unit, and its fixed cost per unit is $2.50. Management would like the clock division to transfer 8.000 of these clocks to another division within the company at a price of $5. The clock division could avoid $0.50 per clock variable packaging costs by selling internally. Required:a. Determine the minimum transfer price, assuming the clock division is not operating at full capacity and what is your interpretation of these results?b. Determine the minimum transfer price, assuming the clock division is operating at full capacity and what is your interpretation of these results?c. Why transfer pricing policy can be interpreted negatively and positively? Give an explanation!
Dhapa
Uramilaben
Dinesh bhai
San Juan, Incorporated, is considering two alternatives: A and B. The costs associated with the alternatives are listed below: Alternative A Alternative B Material costs $ 35,000 $ 57,000 Processing costs 36,000 57,000 Building costs 12,000 28,000 Equipment rental 19,000 19,000 Are the materials costs and processing costs differential in the choice between alternatives A and B? Multiple Choice Neither materials costs nor processing costs are differential. Both materials costs and processing costs are differential. Only processing costs are differential. Only materials costs are differential.