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LuckyWell [14K]
3 years ago
10

a manufacturing firm is considering two locations for a plant to produce a new product. the two locations have fixed and variabl

e costs as folls location FC(ANNUAL) VC(per unit) atlanta $80,000 $20 phoenix $140,000 $16 IF THE ANNUAL DEMAND WILL BE 20,000 units, what would be the cost advantage of the better location? HINT: compare the total costs a 60000 b 20000 c 460000 d 40000
Business
1 answer:
NikAS [45]3 years ago
4 0

Answer:

b $20,000

Explanation:

For computation of cost advantage first we need to find out the total cost of  Atlanta and Phoenix which is shown below:-

Total cost = Fixed cost + (Variable cost × Number of units)

For Atlanta

The Total cost = $80,000 + ($20 × 20,000)

= $480,000

For Phoenix

The ​​​​​​​Total cost = $140,000 + ($16 × 20,000)

= $460,000  

According to the above calculation, Phoenix is best location because it has lower total cost.

So

The Cost advantage at Phoenix = Total cost of Atlanta - Total cost of Phoenix

= $480,000 - $460,000

= $20,000

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