A from that has recently experienced an enormous growth rate is seeking to lease
ID: 448739 • Letter: A
Question
A from that has recently experienced an enormous growth rate is seeking to lease a small plant in Memphis. TN. blood, MS. or Birmingham, AL Prepare an economic analysis of the three locations given the following information Annual costs for equipment and administration would be $46,000 for Memphis. S60.000 lot Biloxi. and $100 000 for Birmingham Labor and materials are expected to be $8 per untf in Memphis. S4 per unit in priori and $5 per unit in Birmingham The Memphis location would increase system transportation costs by $50,000 per year the location by $60,000 per year, and the Birmingham location by $26,300 per year Expected annual volume is 14,400 units (Omit the $ sign in your response.)Explanation / Answer
Total cost= Annual cost for building, equipment and admin+ Labor and material cost per unit*Annual volume+ Incremental total cost
For Mephis, total cost=46000+8*1400+50000=107200
For Biloxi, total cost=60000+4*1400+60000=125600
For Birmingham, total cost=100000+5*1400+26800=107200
Memphis
Biloxi
Birmingham
Annual cost
46000
60000
100000
Labor and material per unit
8
4
5
Annual volume
1400
1400
1400
Incremental transportation cost
50000
60000
26800
Total cost
107200
125600
133800
Memphis
Biloxi
Birmingham
Annual cost
46000
60000
100000
Labor and material per unit
8
4
5
Annual volume
1400
1400
1400
Incremental transportation cost
50000
60000
26800
Total cost
107200
125600
133800