A stereo company supplier car radios to auto manufacturers and is going to open a new plant. The company is undecided between Serendah and Seremban as the site. The fixed costs for Serendah are lower due to cheaper land costs, but the variable costs are higher because shipping distances would increase. Given the following costs: i. ii. iii. Cost Fixed Variable Serendah RM600,000 RM28/radio Seremban RM800,000 RM22/radio Graph the total-cost lines for all the sites. Over what range of volume is each location the preferable one? For a volume of 20,000 units, which site is the best?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A stereo company supplier car radios to auto manufacturers and is going to open a new
plant. The company is undecided between Serendah and Seremban as the site. The fixed
costs for Serendah are lower due to cheaper land costs, but the variable costs are higher
because shipping distances would increase. Given the following costs:
i.
ii.
iii.
Cost
Fixed
Variable
Serendah
RM600,000
RM28/radio
Seremban
RM800,000
RM22/radio
Graph the total-cost lines for all the sites.
Over what range of volume is each location the preferable one?
For a volume of 20,000 units, which site is the best?
Transcribed Image Text:A stereo company supplier car radios to auto manufacturers and is going to open a new plant. The company is undecided between Serendah and Seremban as the site. The fixed costs for Serendah are lower due to cheaper land costs, but the variable costs are higher because shipping distances would increase. Given the following costs: i. ii. iii. Cost Fixed Variable Serendah RM600,000 RM28/radio Seremban RM800,000 RM22/radio Graph the total-cost lines for all the sites. Over what range of volume is each location the preferable one? For a volume of 20,000 units, which site is the best?
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