Question

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:

Memphis Beloxi Birmingham
Annual costs for building, equipment, and administration $40,000 $60,000 $100,000
Labor and materials are expected to be (per unit) $8 $4 $5
Increase system transportation costs (per year), Expected annual volume is 10,000 units. $50,000 $60,000 $25,000

Answer 1

Answer and Explanation:

The computation of the total cost under each locations is as follows:

The total cost of Memhpis is

= $40,000 + (10,000 units × $8) + $50,000

= $40,000 + $80,000 + $50,000

= $170,000

The total cost of Biloxi is

= $60,000 + (10,000 units × $4) + $60,000

= $60,000 + $40,000 + $60,000

= $160,000

And, the total cost of Birmingham is

= $100,000 + (10,000 units × $5) + $25,000

= $100,000 + $50,000 + $25,000

= $175,000