Locational break - even analysis, Operation Management

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:

  1. Determine all relevant costs that vary with each location.
  2. Categorize the costs for each location in to annual fixed costs (FC) and variable costs per unit (VC) and calculate the total cost(TC) for the desired volume of production per annum, for each location.
  3. Plot the total costs associated with each location on a single chart or graph of annual cost versus annual production volume.
  4. Select the location with the lowest total annual cost(TC) at the expected production volume per annum Q

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.

Posted Date: 1/11/2013 7:07:16 AM | Location : United States







Related Discussions:- Locational break - even analysis, Assignment Help, Ask Question on Locational break - even analysis, Get Answer, Expert's Help, Locational break - even analysis Discussions

Write discussion on Locational break - even analysis
Your posts are moderated
Related Questions
A grocery chain is considering the installation of a set of 4 self-checkout lanes. The new self-checkout lane setup will replace 2 old cashier lanes that were staffed by a cashier

1. If Rosa hires Caleb and after working for two months, Caleb requests additional time off to take care of his ailing wife and Rosa denies his request: A. Caleb has an actionab

Submit Apple, Inc.'s Human Resource Management Legal Issues related to Apple, Inc.'s HRM Strategic Workforce Improvement Plan project

Operations applications are least prominent for distributors, wholesales, manufacturers or retailers?

Aims of Trade off in Business Strategy - Operations Focus The aim of operations focus is to ensure that, along with the other management functions, all of the operations workf

Frameworks for Developing Performance Measures  There are a number of approaches which will be described here in broad terms:  The Kaplan and Norton balanced scorecard

1. The chapter mentions the theory of transaction cost analysis (TCA). What role does TCA play in the decision to use a company sales force rather than independent manufacturers' a

Identify the main types of traditional and horizontal organization structure. Using an organization of your choice as an example how is the structure of the organization a reflecti

Eric Johnson makes billiard balls in his New England plant. With recent increases in his costs, he has a newfound interest in efficiency. Eric is interested in determining the prod

Question: What Maintenance policies to be done by the operations manager to reduce failures and improve productivity? • Emphasize on suitable maintenance practices. • Give a