A newly formed firm 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 there would be a loss in sales volume because customers tend to favor local suppliers. Revenue per unit will be $181 in either case. Omaha Kansas City Annual fixed costs ($ millions) $ 1.0 $ 1.1 Variable cost per unit $ 32 $ 47 Expected annual demand (units) 9,225 10,775 Using the above information, determine which location would produce the greater profit. (Omit the "$" sign in your response.)
A newly formed firm 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 there would be a loss in sales volume because customers tend to favor local suppliers. Revenue per unit will be $181 in either case. Omaha Kansas City Annual fixed costs ($ millions) $ 1.0 $ 1.1 Variable cost per unit $ 32 $ 47 Expected annual demand (units) 9,225 10,775 Using the above information, determine which location would produce the greater profit. (Omit the "$" sign in your response.)
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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A newly formed firm 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 there would be a loss in sales volume because customers tend to favor local suppliers. Revenue per unit will be $181 in either case. |
| Omaha | Kansas City | |||
| Annual fixed costs ($ millions) | $ | 1.0 | $ | 1.1 |
| Variable cost per unit | $ | 32 | $ | 47 |
| Expected annual demand (units) | 9,225 | 10,775 | ||
|
Using the above information, determine which location would produce the greater profit. (Omit the "$" sign in your response.) |
| (Click to select) Kansas City Omaha would produce the greater gross profit of $ . |
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