Darren"s Custom Guitars has narrowed its potential choices for its new manufacturing facility to four cities. The following information is known about each of these four cities:
|
Fixed Costs per Year
|
Variable Costs per Unit
|
|
Phoenix
|
$300,000
|
$/3.00
|
|
Buffalo
|
$600,000
|
$60.00
|
|
Seattle
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$1,500,000
|
$38.00
|
|
Atlanta
|
$1.750,000
|
$47.00
|
a. Use breakeven point analysis to determine where Darren should locate.
b. Based solely on breakeven quantity, if Darren"s manufacturing forecast for the foreseeable future is 40,000 units annually.