### Determining the Optimal Location for a New Plant: Jackson, Mississippi vs. Dayton, OhioTwo alternative locations are under consideration for a new plant: Jackson, Mississippi, and Dayton, Ohio. The Jackson location is superior in terms of costs. However, management believes that sales volume would decline if this location were chosen because it is farther from the market, and the firm's customers prefer local suppliers. The selling price of the product is $375 per unit in either case. Use the following information to determine which location yields the higher total profit per year:#### Cost and Demand Information:| Location | Annual Fixed Cost | Variable Cost per Unit | Forecasted Demand per Year ||----------|--------------------|-----------------------|----------------------------|| Jackson | $2,100,000 | $45 | 40,000 units || Dayton | $3,000,000 | $80 | 39,000 units |### Calculations:To determine the annual profit, we need to calculate the total revenue and total cost for each location.#### Jackson:- **Revenue**: $ 40,000 \text{ units} \times \$375 \text{ per unit} = \$15,000,000 $- **Variable Cost**: $ 40,000 \text{ units} \times \$45 \text{ per unit} = \$1,800,000 $- **Total Cost**: $ \$2,100,000 \text{ (fixed)} + \$1,800,000 \text{ (variable)} = \$3,900,000 $- **Profit**: $ \$15,000,000 - \$3,900,000 = \$11,100,000 $#### Dayton:- **Revenue**: $ 39,000 \text{ units} \times \$375 \text{ per unit} = \$14,625,000 $- **Variable Cost**: $ 39,000 \text{ units} \times \$80 \text{ per unit} = \$3,120,000 $- **Total Cost**: $ \$3,000,000 \text{ (fixed)} + \$3,120,000 \text{ (variable)} = \$6,120,000 $- **Profit**: $ \$14,625,000 - \$6,120,000 = \$8,505,000 $###

Two alternative locations are under consideration for a new plant: Jackson, Mississippi, and Dayton, Ohio. The Jackson location is superior in terms of costs. However, management believes that sales volume would decline if this location were chosen because it is farther from the market, and the firm's customers prefer local suppliers. The selling price of the product is $375 per unit in either case. Use the following information to determine which location yields the higher total profit per year: i Location Jackson Dayton Annual Fixed Cost $2,100,000 $3,000,000 Variable Cost per Unit $45 $80 Forecasted Demand per Year 40,000 units 39,000 units The annual profit from Jackson is $8575000 (Enter your response as an integer.)

Two alternative locations are under consideration for a new plant: Jackson, Mississippi, and Dayton, Ohio. The Jackson location is superior in terms of costs. However, management believes that sales volume would decline if this location were chosen because it is farther from the market, and the firm's customers prefer local suppliers. The selling price of the product is $375 per unit in either case. Use the following information to determine which location yields the higher total profit per year: i Location Jackson Dayton Annual Fixed Cost $2,100,000 $3,000,000 Variable Cost per Unit $45 $80 Forecasted Demand per Year 40,000 units 39,000 units The annual profit from Jackson is $8575000 (Enter your response as an integer.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

You are considering relocating your outdoor-equipment manufacturing plant and have narrowed your choices to four possible locations based on the availability of high quality labor, rail transportation, and an adequate distribution network. Based on the following costs and benefits associated with each location, use incremental analysis and IRR to choose the most cost-effective location assuming MARR = 15%. Initial cost (Year 0) Annual operations and maintenance costs (Years 1 thru 5) Annual gross benefits (Years 1 thru 5) Upload Choose a File Question 6 Portland, OR Bend, OR Boise, ID $700,000 $800,000 $600,000 500,000 800,000 Seattle, WA $1,000,000 1,000,000 400,000 1,100,000 You consider purchasing a new piece of equipment (7yr MACRS property) f 1,375,000 625,000 1,500,000 sod POLE 1-10 1
Vikrambhai
Hazlett & Family is organized into two geographic markets Northern and Southern. The company makes an off-road vehicle for recreation and agricultural use. The vehicle is sold in three models, depending on the power and options. The three models, from least expensive to most expensive, are the H-L, H-LX, and H-LXS. The company's financial staff has prepared the following forecasted income statement for the upcoming fiscal year (in thousands of dollars): Sales revenue Cost of goods sold Gross margin Marketing costs Administrative costs Total marketing and administrative Operating profits Total $ 59,400 46,050 $ 13,350 4,875 2,421 $ 7,296 $ 6,054 Management has expressed special concern with the Southern market because of the extremely poor return on sales. This market was entered a year ago because it seemed like the best opportunity for growth. Hazlett & Family knew that it would take some time to build profitability in the market, but there has been no noticeable change in the low…
How would I do this problem?
Applying Differential Analysis to Alternative Profit Scenarios Epson produces color cartridges for inkjet printers. Suppose cartridges are sold to mail-order distributors for $5.20 each. Total fixed costs per year are $1,881,000. Variable cost per unit are $1.85 for direct materials, $0.10 for direct labor, $0.30 for factory overhead, and $0.05 for distribution. The variable distribution costs are for transportation to mail-order distributors. Also assume the current annual production and sales volume is 990,000 and annual capacity is 1,210,000 units. REQUIRED The company would like to increase profitability in the upcoming year. Estimate the effect of the following separate proposals on annual profits. a. A 15% increase in the unit selling price would likely decrease annual sales by 99,000 units. Note: enter all numbers as positive numbers, do NOT use a negative sign. x . Net estimated profits would increase ✔ by $ 0 b. A 10% decrease in the unit selling price would likely increase…
Hazlett & Family is organized into two geographic markets Northern and Southern. The company makes an off-road vehicle for recreation and agricultural use. The vehicle is sold in three models, depending on the power and options. The three models, from least expensive to most expensive, are the H-L, H-LX, and H-LXS. The company's financial staff has prepared the following forecasted income statement for the upcoming fiscal year (in thousands of dollars): Sales revenue Cost of goods sold Gross margin Marketing costs Administrative costs Total marketing and administrative Operating profits Total $ 59,400 46,050 $ 13,350 H-L H-LX H-LXS 4,875 2,421 $ 7,296 $ 6,054 Management has expressed special concern with the Southern market because of the extremely poor return on sales. This market was entered a year ago because it seemed like the best opportunity for growth. Hazlett & Family knew that it would take some time to build profitability in the market, but there has been no noticeable change…
R.p
A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative
Use the breakeven model to determine which of the statements below is TRUE according to the information provided in the table relating to two different locations considered for a new manufacturing facility. LOCATION ANNUAL FIXED COSTS UNIT VARIABLE COSTS Site A $120,000 Site B $110,000 a. The breakeven point for these two locations is 909 units per year b Se B is the desired location if the production rate is 1000 units per year The breakeven point for these two locations is 625 units per year d Ste A is the desired location if the production rate is 500 mits per year $18 $29
Making pricing decisions Johnson Builders builds 1,500—square-foot starter tract homes in the fast-growing suburbs of Atlanta. Land and labor are cheap, and competition among developers is fierce. The homes are a standard model, with any upgrades added by the buyer after the sale. Johnson Builders’s costs per developed sub lot are as follows: Johnson Builders would like to earn a profit of 14% of the variable cost of each home sold. Similar homes offered by competing builders sell for $207,000 each. Assume the company has no fixed costs. Requirements Which approach to pricing should Johnson Builders emphasize? Why? Will Johnson Builders be able to achieve its target profit levels? Bathrooms and kitchens are typically the most important selling features of a home. Johnson Builders could differentiate the homes by upgrading the bathrooms and kitchens. The upgrades would cost $16,000 per home but would enable Johnson Builders to increase the sales prices by $28,000 per home. (Kitchen and…

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS