A manufacturing firm is planning to open a new factory. There are four countries under consideration: USA, Canada, Mexico, and Panama. The table below lists the fixed costs and variable costs for each site. The product is mainly sold in the U.S. for $950 per unit.
Location Fixed Cost Variable cost
USA $500,000 $210
Mexico $150,000 $250
Canada $300,000 $230
Panama $ 50,000 $300
a- Using cross-over analysis, find the range of production that makes each country optimal with lowest total cost.
b- Using Excel, construct total production cost linear graph for all 4 locations and verify cross-over points obtained in part (a). In your graph, use quantity values from 0 to 11,000 at increment of 200.
c- If the company forecasts that market demand will be around 8000 per year, which country is the best choice and what is the yearly profit?
d- Construct Total cost, Total revenue, and Total profit graphs for the optimal location.