Question

Jessica Martin is establishing a company that would be well suited to three areas, New Orleans, Los Angeles, and New York. The respective fixed and variable costs for one year are as follows:
City 
Fixed Costs 
Variable Costs per Unit 
Total Cost at 1,000,000 Units 
Total Cost at 2,000,000 Units 
Total Cost at 3,000,000 Units 
New Orleans 
$500,000 
$100 
$1,500,000 
$2,500,000 
$3,500,000 
Los Angeles 
$800,000 
$80 
$1,600,000 
$2,400,000 
$3,200,000 
New York 
$950,000 
$60 
$1,550,000 
$2,150,000 
$2,750,000 
Using the location breakeven method, determine the best cost location for 1,000,000, 2,000,000, and 3,000,000 units. Plot the options on a graph and indicate the areas of lowest cost.


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  • CreatedMay 23, 2015
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