A Firm Is Trying to Decide Between Two Location Alternatives

question 39

Essay

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

---

Definitions:

Adjustment

The process of adapting or becoming accustomed to a new condition, situation, or environment.

Psychosomatic Diseases

Illnesses where psychological factors play a significant role in the development, manifestation, or exacerbation of physical symptoms.

Post-Traumatic Stress Disorder

A mental health condition triggered by experiencing or witnessing a terrifying event, characterized by severe anxiety, flashbacks, and uncontrollable thoughts about the event.

Vulnerability

The state of being exposed to the possibility of being attacked or harmed, either physically or emotionally.