Question

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:

Answer 1

Answer:

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