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
Electronic Executive Information Systems (EIS) and Expert Systems (ES) are examples of  Decision based software.

You are the new owner of a local ice cream store located in a strip mall adjacent to a university campus. You've decided to sell 20 flavours of ice cream and are contemplating whet

Essentially relativism reject the notion that there is are no absolutes that govern our behaviour. How then do we determine how we behave? How reasonable and plausible is this posi

Last month, Steven Smith was hired as the secretary for lawyer Wayne Wright, who has a drinking problem. Wayne's last secretary quit when Wayne tried to get her to go out with him

Question: What are different conditions which a company has to make sure before the implementation of the Cost of Quality? Description/Definition of cost of Quality • The

Determine the utilization and the efficiency for each of these situations: a. A loan processing operation that processes an average of 7 loans per day. The operation has a design c

What does it take to influence a sales team to achieve excellent results in generating revenue and profit? To help understand this process, discuss some of the most important cri

PPC in job Production Job production includes manufacturing of products to meet particular customer requirements of special orders. The quantity included is usually small. In

Final Paper The final six to eight page paper must demonstrate understanding of new learning in the field of project management. It is mandatory to have research from the classroom

Discuss the advisability of using modular assemblies in manufacturing. (What are the advantages and disadvantages?) To what extent can these arguments be applied to service product