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 $250 per unit in either case. Use the following information to determine which location yields the higher total profit per year: Location AnnualFixed Cost Variable Costper Unit ForecastDemand per Year Jackson Dayton $1,500,000 $2,800,000 $50 $85 30,000 units 40,000 units

Practical Management Science
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ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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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 $250 per unit in either case. Use the following information to determine which location yields the higher total profit per year:

Location Annual
Fixed Cost
Variable Cost
per Unit
Forecast
Demand per Year

Jackson

Dayton

$1,500,000

$2,800,000

$50

$85

30,000 units

40,000 units

 

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