Locational Break - even analysis
In comparing several potential location on an economic basis,( i., e, tangible factor) the only revenues and costs that need to be considered are the ones that vary from on e location to another.If revenue per unit is the same regardless of where the goods is produced the total revenues can be eliminated from consideration. An economic comparison of locations can be made by identifying the fixed costs and variable costs plotting the breakeven analysis on graph for each location.
This graphical approach can easily identify the range of annual production volume over which a location is preferable.
The steps involved in this method are:
Note : If revenues vary from one location to another then comparison of location should be made on the basis of profits( i, e, Total revenue Total cost) at each location.