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:

Annual costs for building, equipment, and administration would be $45,200 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 $27,800 per year. Expected annual volume is 17,800 units.

Answer 1

Answer and Explanation:

The computation of economic analysis of the three locations is shown below:-

Memphis Total Cost is

= $45,200 + $8(17,800 units) + $50,000

= $237,600

Biloxi Total Cost is

= $60,000 + $4(17,900 units) + $60,000

= $191,600

Birmingham Total Cost is

= $100,000 + $5(17,800 units) + $27,800

= $216,800

In this way it is to be shown