Reference no: EM132647002

1. 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 $995 per unit.

Location Fixed Cost Variable cost
USA $1,000,000 $200
Mexico $550,000 $250
Canada $700,000 $230
Panama $450,000 $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 20,000 at increments of 500.

c- If the company forecasts that market demand will be around 8,000 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 in part C. In your graph, use quantity values from 0 to 15,000 at increments of 500.