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2. Case study on strategic capacity planning (15 marks) You have textile factory producing all types of dresses for defense and public security. Public security has placed an order of 80,000 pairs of socks for its staff. You factory doesn't have capacity to install machines for making socks and you are looking for another facility. You have identified three locations - A, B and C. But expenses of each facility are divergent. For example facility A having lowest annual fixed cost has highest variable cost per unit. On other hand, facility C having highest annual fixed cost has lowest variable cost per unit. In order to meet fixed cost and variable cost you need a loan from bank. Interest rate will be low if you pay back early. You will be able to pay back the loan when you reach breakeven. If you charge high price per unit you will reach breakeven early. Using the table below, find out the price for each alternative to be charged for breakeven Alternatives -> A Annual Fixed Cost () S0000 Variable Cost per unit (s) 0.65 70000 90000 0.55 0.40 Page 2 of 4 EXAMINATION QUESTION BOOKLET DIN UW SNTTON IN4 ED02/2016 Price to be charged for breakeven