A manufacturer is considering some expansion alternatives. One is to increase the capacity at their present location. A second set of alternatives is to build a new plant at one of two possible locations. The projected operating costs have been estimated as follows:
$\begin{array}{lccc}
\underline{\text {Cost Category}}&
\underline{\text {Expand at Present Location}}& \underline{\text {Location A }}& \underline{\text {Location B}}\
\text { Fixed } & \$ 125,000 & \$ 225,000 & \$ 175,000 \
\text { Direct labor per unit } & \$ 32.5 & \$ 30 & \$ 33 \
\text { Direct material per unit } & \$ 16 & \$ 17 & \$ 15.50 \
\text { Overhead cost per unit } & \$ 2.90 & 2.40 & \$ 2.50 \
\text { Transportation cost per } 100 \text { units } & \$ 125 & \$ 100 & \$ 110
\end{array}$
If the forecast of additional demand for the next year is 25,000 units, which alternative should be selected?

Question

A manufacturer is considering some expansion alternatives. One is to increase the capacity at their present location. A second set of alternatives is to build a new plant at one of two possible locations. The projected operating costs have been estimated as follows:
 $\begin{array}{lccc}
 \underline{\text {Cost Category}}&
 \underline{\text {Expand at Present Location}}& \underline{\text {Location A }}& \underline{\text {Location B}}\
\text { Fixed } & \$ 125,000 & \$ 225,000 & \$ 175,000 \
\text { Direct labor per unit } & \$ 32.5 & \$ 30 & \$ 33 \
\text { Direct material per unit } & \$ 16 & \$ 17 & \$ 15.50 \
\text { Overhead cost per unit } & \$ 2.90 & 2.40 & \$ 2.50 \
\text { Transportation cost per } 100 \text { units } & \$ 125 & \$ 100 & \$ 110
\end{array}$
 If the forecast of additional demand for the next year is 25,000 units, which alternative should be selected?

Quizplus · Accepted Answer

The Answer of A manufacturer is considering some expansion alternatives. One is to increase the capacity at their present location. A second set of alternatives is to build a new plant at one of two possible locations. The projected operating costs have been estimated as follows:
 $\begin{array}{lccc}
 \underline{\text {Cost Category}}&
 \underline{\text {Expand at Present Location}}& \underline{\text {Location A }}& \underline{\text {Location B}}\
\text { Fixed } & \$ 125,000 & \$ 225,000 & \$ 175,000 \
\text { Direct labor per unit } & \$ 32.5 & \$ 30 & \$ 33 \
\text { Direct material per unit } & \$ 16 & \$ 17 & \$ 15.50 \
\text { Overhead cost per unit } & \$ 2.90 & 2.40 & \$ 2.50 \
\text { Transportation cost per } 100 \text { units } & \$ 125 & \$ 100 & \$ 110
\end{array}$
 If the forecast of additional demand for the next year is 25,000 units, which alternative should be selected?

A Manufacturer Is Considering Some Expansion Alternatives If the Forecast of Additional Demand for the Next Year