Thiru is a coconut oil extraction company based in Chennai, India. Management is considering four locations for a new plant: Trichy, Villupuram, Thiruvannamalai, and Nagapattinam. Annual fixed costs and variable costs per ton are shown in the below table.

a. Plot the total cost curves for all the locations on a single graph (see Solved Problem 2). Identify on the graph the range in volume over which each location would be best.
b. What break-even quantity defines each range? Although Trichy’s fixed and variable costs are dominated by those of the other locations, Thiru believes that both the demand and the price would be higher for oil extracted in Trichy than for oil extracted in the other locations. The following table shows those projections:

c. Determine which location yields the highest total profit per year.
d. Is this location decision sensitive to forecast accuracy? At what minimum sales volume does Trichy become the location of choice?

Transcribed Image Text:

Location Trichy Villupuram Tiruvannamalai Nagapattinam Annual Fixed Costs Variable Costs per Ton *14,000 *400 ₹5,000 *350 *17,000 13,000 ₹75 *200