Answer:
Peter Billington Stereo, Inc.
A. Based on the analysis of the volume after rounding the numbers to the nearest number, Dallas is best below and Detroit is best above 70,000 radios.
B. With Dallas's fixed costs increased by 10%, Dallas is best below and Detroit is best above 56,000 radios.
Explanation:
Identify total costs at various volumes as follows:
Total costs, TC = Variable Cost, VC + Fixed Cost, FC
At 14,000 units:
a) Dallas' TC = VC = $28 x 14,000 + $560,000 = $952,000
b) Dallas' TC with 10% increase in FC = $28 x 14,000 + $616,000 = $1,008,000
c) Detroit's TC = $24 x 14,000 + $840,000 = $1,176,000
At 56,000 units:
a) Dallas' TC = $28 x 56,000 + $560,000 = $2,128,000
b) Dallas' TC with 10% increase in FC = $28 x 56,000 + $616,000 = $2,184,000
c) Detroit's TC = $24 x 56,000 + $840,000 = $2,184,000
At 67,200 units:
a) Dallas' TC = $28 x 67,200 + $560,000 = $2,441,600
b) Dallas' TC with 10% increase in FC = $28 x 67,200 + $616,000 = $2,497,600
c) Detroit's TC = $24 x 67,200 + $840,000 = $2,452,800
At 70,000 units:
a) Dallas' TC = $28 x 70,000 + $560,000 = $2,520,000
b) Dallas' TC with 10% increase in FC = $28 x 70,000 + $616,000 = $2,576,000
c) Detroit's TC = $24 x 70,000 + $840,000 = $2,520,000
At 153,993 units:
a)Dallas' TC = $28 x 153,993 + $560,000 = $4,871,804
b) Dallas' TC with 10% increase in FC = $28 x 153,933 + $616,000 = $4,927,804
c) Detroit's TC = $24 x 53,993 + $840,000 = $4,535,832
