A newly formed company must decide on a plant location. There are two alternatives under consideration: locate near the major raw' materials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than locating near the market, but tire owners believe that there would be a loss in sales volume because customers tend to favour local suppliers. Revenue per unit will be $180 in either case. Using the following information, determine which location would produce greater profit.

Transcribed Image Text:

Near Raw Mat Near Customers Annual fixod costs ($ milions).. $1.2 $36 8,000 $14 $47 12,000 Expected annual demand lunits