A Manufacturing Firm Is Considering Two Locations for a Plant

A manufacturing firm is considering two locations for a plant to produce a new product. The two locations have fixed and variable costs as follows: $$\begin{array} { l r l } \text { Location } & \mathrm { FC } \text { (annual) } & \mathrm { VC } \text { (per unit) } \\\hline \text { Atlanta } & \$ 80,000 & \$ 20 \\\text { Phoenix } & \$ 140,000 & \$ 16\end{array}$$ If annual demand is estimated to be 20,000 units, which location should the company select?

A) Atlanta
B) Phoenix
C) either Atlanta or Phoenix
D) reject both Atlanta and Phoenix
E) build at both locations

Correct Answer:

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