Problem 8-6 A firm that has recently experienced an enormous growth rate is seek
ID: 422506 • Letter: P
Question
Problem 8-6 A firm that has recently experienced an enormous growth rate is seeking to lease a small plant in Memphis, TN; Biloxi, MS; or Birmingham, AL. Prepare an economic analysis of the three locations given the following information: Annual costs for building, equipment, and administration would be $38,400 for Memphis $60,000 for Biloxi, and $100,000 for Birmingham. Labor and materials are expected to be $8 per unit in Memphis, $4 per unit in Biloxi, and $5 per unit in Birmingham. The Memphis location would increase system transportation costs by $50,000 per year, the Biloxi location by $60,000 per year, and the Birmingham location by $24,800 per year. Expected annual volume is 10,800 units.(Omit the "$" sign in your response.) Total Cost Memphis Biloxi Birmingham eBook & Resource Worksheet Difficulty: 2 Medium Problem 8-6 Learning Objective: 08-07 Use the techniques presented to evaluate location alternatives Check my workExplanation / Answer
Total cost for Memphis = Administrative cost + labor and material cost + transportation cost
= 38400 + 10800*8 + 50000 = 174800
Total cost for Biloxi = Administrative cost + labor and material cost + transportation cost
= 60000 + 10800*4 + 60000 = 163200
Total cost for Birmingham = Administrative cost + labor and material cost + transportation cost
= 100000 + 10800*5 + 24800 = 178800