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Questions and Answers
In location planning, what are the four options available to existing companies?
In location planning, what are the four options available to existing companies?
- Expand an existing facility, shut down one location and move to another, do nothing, acquire a competitor
- Expand an existing facility, add new locations while shutting down existing facilities, relocate to a different country, merge with another company
- Expand an existing facility, add new locations while retaining existing facilities, shut down one location and move to another, do nothing (correct)
- Add new locations while retaining existing facilities, shut down one location and move to another, merge with another company, do nothing
According to the text, what are the assumptions in location cost-volume analysis?
According to the text, what are the assumptions in location cost-volume analysis?
- Fixed costs are linear, variable costs are constant, only one product involved
- Fixed costs are constant, variable costs are linear, only one product involved (correct)
- Fixed costs are constant, variable costs are linear, multiple products involved
- Fixed costs vary with output, variable costs are constant, multiple products involved
What are the fixed and variable costs for Location C in the cost-volume analysis example?
What are the fixed and variable costs for Location C in the cost-volume analysis example?
- $100,000 and $20
- $200,000 and $25
- $150,000 and $35 (correct)
- $250,000 and $30
What is the key consideration in evaluating locations according to the text?
What is the key consideration in evaluating locations according to the text?
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What is the primary need for location decisions as mentioned in the text?
What is the primary need for location decisions as mentioned in the text?
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Study Notes
Location Planning
- Existing companies have four options available to them in location planning:
- Relocating or moving to a new location
- Expanding or adding capacity to an existing location
- Closing or abandoning an existing location
- Retaining the existing location with no changes
Location Cost-Volume Analysis
- Assumptions in location cost-volume analysis include:
- Fixed costs remain constant despite changes in output
- Variable costs vary directly with output
- Cost behavior is linear and predictable
Location C Cost-Volume Analysis
- Fixed costs for Location C: $10,000
- Variable costs for Location C: $50 per unit
Evaluating Locations
- Key consideration in evaluating locations: total cost, including both fixed and variable costs
Location Decisions
- Primary need for location decisions: to minimize costs and maximize profitability
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