Answer:
If this facility will produce 15,000 units annually, where should you locate it:_______
e. Singapore
Explanation:
a) Data and Calculations:
Annual Units of Production = 15,000
City Annual Fixed Cost Variable Cost Total Costs Per Unit
(per unit) Total in Total
Singapore $30,000 $2 $30,000 $60,000 $4.00
Hong Kong $20,000 $3 45,000 65,000 $4.33
Niagara Falls $10,000 $6 90,000 100,000 $6.67
b) The facility should be located at Singapore because it has the least total costs for producing 15,000 units. Though, its fixed cost is highest, its variable cost per unit of $2 reduced the total costs to $60,000 annually. This is the lowest among the three locations. The implication is that variable costs and not fixed costs should determine the decision choice.
