Question
Bowie Company plans to build a new facility to manufacture designer purses. Bowie sells its purses across the country for $300 each. It could locate
Bowie Company plans to build a new facility to manufacture designer purses. Bowie sells its purses across the country for $300 each. It could locate the facility in Kentucky which imposes a 5% tax on business income. The estimated manufacturing cost per purse in Kentucky is $120. OR, Bowie could locate the facility in Indiana, which imposes a 3% tax on business income. The estimated manufacturing cost per purse in Indiana is $126 per purse.
1. In which state should Bowie locate their manufacturing facility? Provide calculations to support your answer.
2. Other than taxes, what other factors should be considered by Bowie in choosing where to build their manufacturing plant.
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