A Manufacturer Is Considering Some Expansion Alternatives If the Forecast of Additional Demand for the Next Year

question 7

Multiple Choice

A manufacturer is considering some expansion alternatives. One is to increase the capacity at their current location. A second set of alternatives is to build a new plant at one of two possible locations. The projected operating costs have been estimated as follows: $\begin{array}{lccc}&\text { Expand at Current }\\\text { Cost Category }&\text { Location }&\text { Location A }&\text { Location B }\\\text { Fixed } & \$ 125,000 & \$ 225,000 & \$ 175,000 \\\text { Direct labor per unit } & \$ 32.5 & \$ 30 & \$ 33 \\\text { Direct material per unit } & \$ 16 & \$ 17 & \$ 15.50 \\\text { Overhead cost per unit } & \$ 2.90 & 2.40 & \$ 2.50 \\\text { Transportation cost per } 100 \text { units } & \$ 125 & \$ 100 & \$ 110\end{array}$ If the forecast of additional demand for the next year is 25,000 units, which alternative should be selected to minimize costs?

• A) Expand at current location
• B) Location A
• C) Location B
• D) None of the above

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Definitions:

Sociological Theories

Sociological theories are frameworks developed to understand and analyze the structure, dynamics, and functions of society and social behavior.

Macroscopic Social Facts

Large-scale social phenomena that affect the society as a whole, such as demographic trends, societal norms, and institutions.

Microscopic Individual Behaviors

The examination and analysis of detailed and personal behaviors of individuals at a small-scale level, often in contrast to macroscopic societal trends.

Macro-Subjective Level

An analytical perspective focusing on the collective beliefs, values, and perceptions of society or large groups, influencing social structures and processes.