Problem 8-1 (Static) 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 compared to 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 $185 in either case. Omaha Annual fixed costs ($ millions) Variable cost per unit Expected annual demand (units) Click here for the Excel Data File: $ $ 1.2 36 8,000 would produce the greater gross profit of Kansas City $ $ 1.4 47 12,000 Using the above information, determine which location would produce the greater profit.
Problem 8-1 (Static) 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 compared to 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 $185 in either case. Omaha Annual fixed costs ($ millions) Variable cost per unit Expected annual demand (units) Click here for the Excel Data File: $ $ 1.2 36 8,000 would produce the greater gross profit of Kansas City $ $ 1.4 47 12,000 Using the above information, determine which location would produce the greater profit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Urmila ben
Transcribed Image Text:Problem 8-1 (Static)
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 compared to
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 $185 in either case.
Omaha
1.2
36
8,000
Annual fixed costs ($ millions)
Variable cost per unit
Expected annual demand (units)
Click here for the Excel Data File:
$
$
Kansas City
$
$
1.4
47
12,000
Using the above information, determine which location would produce the greater profit
would produce the greater gross profit of
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