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

question 62

Essay

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?
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Definitions:

Influence

The ability to impact the personality, growth, or actions of an individual or an entity, or the impact in question.

Foreign Subsidiary

A company situated in a different country from its parent company and controlled by the parent company.

Functional Currency

The currency of the primary economic environment in which an entity operates and generates cash flows.

Bond Interest Expense

The cost incurred by an entity for borrowing funds through bond issuance, payable to bondholders as interest.