A manufacturer is planning build a new warehouse. The two potential locations are:
Columbus, with a fixed cost of $4,000 per month, variable cost per unit of $4, and transportation cost per month of $23,000, and Sandusky, with a fixed cost of $3,500 per month, variable cost per unit of $5, and transportation cost per month of $22,000. Revenue per unit is $10.
a. Which location would be best if demand is 800 per month?
b. What is the break-even point at each location?
c. At what volume of demand would the manager be indifferent between each of the two cities? What is the range over which each city provides the lowest cost?