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 lover due to cheaper land costs, but the variable costs in Dallas are higher because shipping distances would increase. Given the following costs:
Dallas Detroit
Fixed Costs $600,000 $800,000
Variable Costs$28/radio $22/radio
A. Perform an analysis of the voume over which each location is preferable.
B. How does your answer change if Dalla's fixed costs increase by 10%?