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
Do Whole Foods Market's mission/vision and the core values as presented in cases Exhibit 1 and 3 really matter? Are they "real" or just cosmetic window dressing? What evidence can

Research suggests that a party with an attractive BATNA will likely receive a more positive outcome if it hides the information from the other side.

Process Capability Index - Measure of the Inherent Capability This index provides a measure of the inherent capability of a process by simply relating the 6σ spread of the pro

A key factor that makes Lean Six Sigma different than other performance improvement models is that it free discusses costs and cost recovery with varying stakeholders.

From the case study, determine what ideals, obligations, and effects must be considered in using psychological tests as pre-employment screens. Decide which the most important cons

What are the arguments for and against social responsibility on the part of businesses? Please in addition, which set of arguments is more compelling?

Vogel Approximation Methods ( VAM): Step 1: For each row the transportation table identify the smallest and next to smallest cost. Determine the different between the

What are the challenges of working across boundaries and how can human resources prepare employees to thrive in a boundary-less organization

1. Identify the appropriate control charts to use with each scenario and state WHY . a. A hospital is trying to improve its image by changing its menu offerings. It offers a qu

In the precedence chart to the right, times are in seconds. 1 Assume that the plant runs one 7.5 hour shift per day and the assembly line is designed with 5 stations (one worker pe