Reference no: EM137864

Q. The Blair Company's three assembly plants are located in California, Georgia, and New Jersey. Previously, the company purchased a main sub-assembly, which becomes part of the final artifact, from an outside firm. Blair has decided to manufacture the subassemblies within the company and must now consider whether to rent one centrally located facility (e.g., in Missouri, where all the subassemblies would be manufactured) or to rent three separate facilities, each located near one of the assembly plants, where each facility would manufacture only the subassemblies needed for the nearby gathering plant. A solitary, centrally located facility, by a production capacity of 18,000 units for every year, would have fixed costs of $900,000 per year and a variable cost of $250 per unit. Three separate decentralized amenities, through construction capability of 8,000, 6,000 also 4,000 units for every year, would have fixed costs of $475,000, $425,000, and $400,000, correspondingly, also variable costs per unit of only $225 per unit, owing chiefly to the decrease in shipping expenses. The current production rates at the three assembly plants are 6,000, 4,500, and 3,000 units, respectively. Assuming that the current production rates are maintained at the three congress plants, that unusual should management select?