A Firm Is Trying to Decide Between Two Location Alternatives,A

question 27

Essay

A firm is trying to decide between two location alternatives,A and B.A would result in annual fixed costs of $60,000,labour costs of $7 per unit,material costs of $10 per unit,transportation costs of $15 per unit,and revenue per unit of $50.Location B would have annual fixed costs of $80,000,labour costs of $6 per unit,material costs of $9 per unit,transportation costs of $14 per unit,and revenue per unit of $48.
(i)At an annual volume of 9,000,which would yield the higher profit?
(ii)At what annual volume would management be indifferent between the two alternatives in terms of annual profits?

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Definitions:

Scale of Measurement

A system of defining and categorizing the properties of variables, often used in research to quantify data.

Cognitive Ability Test

An assessment designed to measure an individual's mental capacity, including memory, reasoning, understanding, and problem-solving skills.

Standard Error

A statistical term that describes the standard deviation of the sampling distribution of a statistic, often used to measure the accuracy with which a sample represents a population.

Correlation

A statistical measure that indicates the extent to which two or more variables fluctuate together.