The MightyBig Company is considering three sites for the location of its new manufacturing plant. Annual estimated revenue along with fixed and variable costs for each site are shown in Table 5.13. Sales volume is expected to be 30,000 units per year. Set up a cost-volume-profit model and hence find the best location using break-even analysis.

Table 5.13 Site Revenue Fixed costs Variable costs location per unit (£’000s) per unit A £70 300 £65 B £70 500 £45 C £68 700 £30

(Answer: For locations A,B,C the break-even points are: BEPu = 60,000, 20,000, 18,421 and BEP£

= £4,200,000, £840,000, £536,842. Corresponding profit (loss) figures are –£150,000, £250,000,

£440,000. The best site is C even though annual fixed costs are much higher than for the other two sites.)