A manufacturing firm is planning to open a new factory. There are four countries
ID: 443843 • Letter: A
Question
A manufacturing firm is planning to open a new factory. There are four countries under consideration: USA, Canada, Mexico, and Panama. The table below lists the fixed costs and variable costs for each site. The product is mainly sold in the U.S. for $850 per unit. Location Fixed Cost Variable cost USA $400,000 $180 Mexico $100,000 $250 Canada $200,000 $200 Panama $ 60,000 $300 a- Find the range of production that makes each country optimal with lowest total cost. b- If the company forecasts that market demand will be around 5200 per year, what country is the best choice and what is the yearly profit?
Explanation / Answer
(A) Range of production that makes each country optimal with lowest total cost
Panama 109 Units to 800 units
Mexico 800 Units to 2000 units
Canada 2000 units to 10,000 units
USA 10,000 units and above
Below 109 units it is not feasible to produce in any of the four countries.
(B) If the demand is around 5,200 units then Canada is the best choice
Total Cost in Mexico for producting 5,200 units are
(5,200 *200)+200,000 =$ 1,240,000
Total Revenue by producing in Canada will be
5,200* 850 = $ 4,420.000
Total Profit = $ 3,180,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.