Table 96
Nuts-And-Bolts Inc -Excel Products Is Planning a New Warehouse to Serve the for a Plant

question 32

Multiple Choice

Table 9.6
Nuts-and-Bolts Inc. wishes to find the best location for a plant
that will satisfy customer demand in the following five areas.
$$\begin{array} { | c | c | c | } \hline \text { Area } & \text { Coordinates } & \text { Demand } \\\hline \mathrm { A } & ( 7,3 ) & 30 \\\mathrm {~B} & ( 7,7 ) & 40 \\\mathrm { C } & ( 1,10 ) & 45 \\\mathrm { D } & ( 2,6 ) & 15 \\\mathrm { E } & ( 4,5 ) & 25 \\\hline\end{array}$$
-Excel Products is planning a new warehouse to serve the Southeast.Locations A,B,and C are under consideration.Fixed and variable costs follow:
$$\begin{array} { | c | c | c | } \hline \text { Location } & \begin{array} { c } \text { Fixed Cost } \\\text { per Year }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { per Unit }\end{array} \\\hline \text { A } & \$ 2,500,000 & \$ 19 \\\text { B } & 1,500,000 & 7 \\\text { C } & 2,000,000 & 9 \\\hline\end{array}$$
Plot the total cost curves in the chart provided below,and identify the range over which each location would be best.Then use break-even analysis as necessary to calculate exactly the break-even quantity that defines each range.

Which of the following statements is correct?

• A) Location A is the best one if volumes are quite high.
• B) Location B is best over all volume levels.
• C) The total cost of location A, if the volume is 250,000 units, is over $7,000,000.
• D) The break-even quantity between A and B is more than 75,000 units but less than 200,000 units.

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Definitions:

Straight-Line Method

A depreciation method that allocates the cost of an asset evenly over its useful life.

FASB

The Financial Accounting Standards Board, an independent organization responsible for establishing accounting and financial reporting standards in the US.

IASB

International Accounting Standards Board, the organization responsible for developing and publishing international financial reporting standards.

Right-Of-Use Asset

Right-of-use asset is a balance sheet item that represents a lessee’s right to use an asset over the lease term under the new accounting standards.