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
I have looked at your solution and I still do not understand how you get the numbers put in for flow time from the information given. I understand how to calculate everything after

Johnson Plastics makes and sells, among many other things, specialty plastic display cases for retail stores. Johnson's expected demand for the display cases is 1,000 units, and av

Do you believe that managers should be given more autonomy to make personnel decisions such as hiring, appraising, and compensating subordinates, or do you believe that managers sh

Write several paragraphs describing the aspects of a servant leader. Why does it appeal to an approach to leadership? What are some concerns? Why does servant leadership seem appro

1. Does Clark have any sources of power and any contingencies of power? If so, list and discuss them. 2. To what degree were Clark's methods of influencing board members the most e

What do you understand by “line balancing”? What happens if balance doesn’t exist?.

Your company's matrix organization isn't working; decisions are taking too long and it seems to you that instead of best solutions you're getting compromises. As CEO what would you

Nielsen ratings are very important to both advertisers and television programmers because the cost of television advertising time is based on this rating. A show's rating is the nu


Operations management is the management of the productive resources of the firm which includes raw materials, human resources, land, equipment and facilities in the manufacture of