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?

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Definitions:

Computer-Controlled

Systems or devices managed or operated by computer algorithms or software rather than directly by human intervention.

External Change Agents

Individuals or organizations from outside an organization who are brought in to oversee or facilitate change management processes and organizational transformations.

Organization's History

The record of significant events, decisions, and changes that have shaped an organization's development and culture over time.

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An unbiased perspective that is not influenced by personal feelings, interpretations, or prejudice.