A Manufacturing Company Preparing to Build a New Plant Is

question 101

Essay

A manufacturing company preparing to build a new plant is considering three potential locations for it. The fixed and variable costs for the three alternative locations are presented below.
a. Complete a numeric locational cost-volume analysis.
b. Indicate over what range each of the alternatives A, B, C is the low-cost choice.
c. Is any alternative never preferred? Explain.
$$\begin{array} { | l | l | l | l | } \hline \text { Costs } & \text { A } & \text { B } & \text { C } \\\hline \text { Fixed (\$) } & 2,500,000 & 2,000,000 & 3,500,000 \\\hline \text { Variable (\$ per unit) } & 21 & 25 & 15 \\\hline\end{array}$$

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Definitions:

Budgeted Goals

Predicted financial or operational targets that a company aims to achieve within a specific time frame.

Actual Performance

The real or achieved outcomes of a business activity or process, measured against its expected, budgeted, or standardized goals or parameters.

Controlling

In management, it refers to the process of monitoring performance against goals, identifying deviations, and taking corrective action to ensure that business objectives are achieved.

Cash Deficiency

A financial state where the cash available is not sufficient to cover the debts or liabilities owed, indicating potential liquidity problems.