Peter Billington Stereo, Inc., supplies car radios to auto manufacturers and is going to open a new plant. The company is undecided between Detroit and Dallas as the site. The fixed costs in Dallas are lower due to cheaper land costs, but the variable costs in Dallas are higher because shipping distances would increase. Dallas Detroit Fixed costs $ 560,000 $ 840,000 Variable costs $ 30 /radio $ 21 /radio a) Based on the analysis of the volume, after rounding the numbers to the nearest whole number, Dallas is best below and Detroit is best above:

Question

Neveah Arroyo

Business

11 June, 01:51

Peter Billington Stereo, Inc., supplies car radios to auto manufacturers and is going to open a new plant. The company is undecided between Detroit and Dallas as the site. The fixed costs in Dallas are lower due to cheaper land costs, but the variable costs in Dallas are higher because shipping distances would increase. Dallas Detroit Fixed costs $ 560,000 $ 840,000 Variable costs $ 30 /radio $ 21 /radio a) Based on the analysis of the volume, after rounding the numbers to the nearest whole number, Dallas is best below and Detroit is best above:

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Answers (1)

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Aidyn · Answer 1

31,111

Explanation:

Data provided in the question:

Dallas Detroit

Fixed costs $560,000 $840,000

Variable costs $30 /radio $21 /radio

Now,

Let the Volume where both the options are equal be 'V'

Therefore,

V * (Variable cost of Dallas - Variable cost of Detroit) = (Fixed cost of Detroit - Fixed cost of Dallas)

or

V * ($30 - $21) = $840,000 - $560,000

or

V * $9 = $280,000

or

V = 31111.11 ≈ 31,111