Chapter 5 location - 2nd
- 1. 8 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall Locational Break-Even Analysis Method of cost-volume analysis used for industrial locations Three steps in the method 1. Determine fixed and variable costs for each location 2. Plot the cost for each location 3. Select location with lowest total cost for expected production volume
- 2. 8 - 2© 2011 Pearson Education, Inc. publishing as Prentice Hall Locational Break-Even Analysis Example Three locations: Perlis 30,000 75 180,000 Pahang 60,000 45 150,000 Perak 110,000 25 160,000 Fixed Variable Total City Cost (RM)Cost (RM) Cost (RM) Total Cost = Fixed Cost + (Variable Cost x Volume) Selling price = RM120 Expected volume = 2,000 units
- 3. 8 - 3 Locational Break-Even Analysis Example – 180,000 – – 160,000 – 150,000 – – 130,000 – – 110,000 – – – 80,000 – – 60,000 – – – 30,000 – – 10,000 – – Annualcost(RM) | | | | | | | 0 500 1,000 1,500 2,000 2,500 3,000 Volume Perlis lowest cost Pahang lowest cost Perak lowest cost
- 4. 8 - 4 APRIL 2003 (1a) TCP = RM150,000 + RM60 (40,000 units) = RM255,0000 TCJ = RM300,000 + RM40 (40,000 units) = RM190,0000 TCT = RM500,000 + RM20 (40,000 units) = RM130,000 © 2011 Pearson Education, Inc. publishing as Prentice Hall
- 5. 8 - 5 APRIL 2003 (1b) TCPerlis =TCJohor RM150,000 + RM60x = RM300,000 + RM40x RM60x – RM40x = RM300,000 – RM150,000 RM20x = RM150,000 X = 7500 units © 2011 Pearson Education, Inc. publishing as Prentice Hall
- 6. 8 - 6© 2011 Pearson Education, Inc. publishing as Prentice Hall TCPerlis =TCTerengganu RM150,000 + RM60x = RM500,000 + RM20x RM60x – RM20x = RM500,000 – RM150,000 RM40x = RM350,000 X = 8,750 units
- 7. 8 - 7 TCJohor =TCTerengganu RM300,000 + RM40x = RM500,000 + RM20x RM40x – RM20x = RM500,000 – RM300,000 RM20x = RM200,000 X = 10,000 units © 2011 Pearson Education, Inc. publishing as Prentice Hall
- 8. 8 - 8© 2011 Pearson Education, Inc. publishing as Prentice Hall – – – – 500000 – – – 400000 – – – 300000 – – – 200,000 – – 100000 – – – Annual cost (RM) | | | | | | | 0 5000 10000 Volume Perlis lowest cost Johor lowest cost Terengganu lowest cost TCp = 150000 + 60x TCT = 500000 + 20x TCJ = 300000 + 40x
- 9. 8 - 9 APRIL 2003 (1c) Range Location 0 – 7500 unit Perlis 7500 – 10,000 units Johor More than 10000 units Terengganu
- 10. 8 - 10 October 2009 May 2012