William Green, Vice President of Manufacturing for Computer Products Corporation

question 8

Essay

William Green, vice president of manufacturing for Computer Products Corporation (CPC), and his staff are studying three midwestern alternative locations for a new production facility for producing high-resolution scanners. His staff analysts predict that the scanners will be a growing market over the next ten years, and the analysis group shares marketing's enthusiasm for planning facilities for producing this new product line. The analysts have developed these estimates for the three locations:
$\begin{array}{lrr}&\text { Annual Fixed Costs }&\text { Variable Cost }\\\text { Location Alternative } &\text { (Millions of Dollars) }&\text { per Scanner }\\\text { Cleveland, Ohio } & \$ 3.9 & \$ 3,400 \\\text { South Bend, Indiana } & 3.6 & 3,700 \\\text { Grand Rapids, Michigan } & 3.1 & 4,000\end{array}$ The marketing department at CPC estimates sales for the scanners will be 1,000 scanners in the first year, 2,000 in the second year, and 4,000 in the third year.
a.In what range of production capacity would each of the locations be preferred?
b.Use break-even analysis to determine which location would be preferred in Years 1, 2, and 3. Which single location should be chosen, and in what year will CPC break even?

---

Definitions:

Lewis Line Structure

A diagram representing the valence electrons of atoms within a molecule using dots and lines for bonding pairs.

Line Structure

A simplified representation of a chemical structure, using lines to represent chemical bonds and showing the arrangement of atoms within the molecule.

Soluble

The property of a substance to be dissolved in a solvent, forming a homogeneous solution at a specified temperature and pressure.

Oxygen

A diatomic molecule that is a colorless, tasteless, and odorless gas essential for respiration in most living organisms.