Peter billington stereo inc supplies car radios to auto, Ask an Expert

Management Studies

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. Given the following costs:

Cost	Dallas	Detroit
Fixed Costs	$600,000	$800,000
Variable costs	$28/radio	$22/radio

a) Perform an analysis of the volume over which each location is preferable.

b) How does your answer change if Dallas's fixed costs increase by 10%?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92099202

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