A Manufacturer Is Considering Some Expansion Alternatives

question 43

Essay

A manufacturer is considering some expansion alternatives.One is to increase the capacity at their present 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:
If the forecast of additional demand for the next year is 25,000 units, which alternative should be selected?

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Definitions:

Physical Count

A periodic inventory auditing process where a business physically counts its entire inventory to verify stock and identify discrepancies.

Perpetual Inventory System

A system of accounting that immediately logs the sale or acquisition of inventory using computerized point-of-sale systems and software for managing enterprise assets.

Freight Costs

Expenses associated with transporting goods from one location to another, often considered part of the cost of sales or inventory.

Refund Liability

Refund Liability refers to the obligation a company has to return funds to a customer for returned or rejected products or services.