A manager must decide between two location alternatives,Montreal and Toronto.Montreal would have annual fixed costs of $80,000,transportation costs of $80 per unit,and labour and material costs of $70 per unit.Toronto would have annual fixed costs of $150,000,transportation costs of $20 per unit,and labour and material costs of $80 per unit.Revenue will be $250 per unit.
(i)Which alternative would yield the higher profit for an annual demand of 2,000 units?
(ii)At what volume (quantity)would the manager be indifferent in terms of which of the two locations were chosen?
What would the profit be at that volume?

Question

A manager must decide between two location alternatives,Montreal and Toronto.Montreal would have annual fixed costs of $80,000,transportation costs of $80 per unit,and labour and material costs of $70 per unit.Toronto would have annual fixed costs of $150,000,transportation costs of $20 per unit,and labour and material costs of $80 per unit.Revenue will be $250 per unit.
(i)Which alternative would yield the higher profit for an annual demand of 2,000 units?
(ii)At what volume (quantity)would the manager be indifferent in terms of which of the two locations were chosen?
 What would the profit be at that volume?

Quizplus · Accepted Answer

The Answer of A manager must decide between two location alternatives,Montreal and Toronto.Montreal would have annual fixed costs of $80,000,transportation costs of $80 per unit,and labour and material costs of $70 per unit.Toronto would have annual fixed costs of $150,000,transportation costs of $20 per unit,and labour and material costs of $80 per unit.Revenue will be $250 per unit.
(i)Which alternative would yield the higher profit for an annual demand of 2,000 units?
(ii)At what volume (quantity)would the manager be indifferent in terms of which of the two locations were chosen?
 What would the profit be at that volume?

A Manager Must Decide Between Two Location Alternatives,Montreal and Toronto