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The management team for Buddy's Bats is considering two locations for a plant to manufacture wooden baseball bats. The plant will produce 500 bats per week. The fixed setup costs for both plants are identical.
Plant A can produce 500 bats per week. The plant works one 8 hour shift per day with 5 staff. The plant works 5 days per week. The average wage is $25 per hour. The plant would use 600 units of maple and can buy maple at $5 per unit. Based on location and staffing levels, the plant would be assigned an overhead allocation of $1000 per week.
Plant B can produce 500 bats per week. The plant works one 8 hour shift per day with 7 staff. The plant works 5 days per week. The average wage is $20 per hour. The plant would use 625 units of maple to make the bats and can buy maple at $4 per unit. Based on location and staffing levels, the plant would be assigned an overhead allocation of $1,500 per week.
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