A manufacturing company preparing to build a new plant is considering three potential locations for it. The fixed and variable costs for the three alternative locations are presented below
a. Complete a numeric locational cost-volume analysis.
b. Indicate over what range each of the alternatives A, B, C is the low-cost choice.
c. Is any alternative never preferred? Explain.
Costs A B C
Fixed ($) 2,500,000 2,000,000 3,500,000
Variable ($ per unit) 21 25 15
B is cheapest up to 125,000 units; C is cheapest after 166,667 units. A is cheapest in between. The B-C crossover is not relevant. Thus each alternative has an attractive range.
Break-even points Units Dollars
Option A vs. Option B 125,000 5,125,000
Option A vs. Option C 166,667 6,000,000
Option B vs. Option C 150,000 5,750,000
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