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 the annual demand will be 20,000 units, what would be the cost advantage of the better location?

A) $20,000
B) $460,000
C) $480,000
D) $80,000
E) $60,000

Correct Answer:

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