Question
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
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 $170 in either case.
Omaha | Kansas City | ||||
Annual fixed costs ($ millions) | $ | 0.9 | $ | 1.0 | |
Variable cost per unit | $ | 20 | $ | 35 | |
Expected annual demand (units) | 9,400 | 10,000 | |||
Using the above information, determine which location would produce the greater profit. (Omit the "$" sign in your response.) (Click to select) Omaha Kansas City would produce the greater gross profit of $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started