Locational Break-Even Analysis

Locational Break-Even Analysis is the use of cost-volume analysis to make an                            economic comparison of locaiton alternatives.
 

There are three steps to locational break-even analysis
 
    1)  Determine the fixed and variable cost for each location

    2)  Plot the costs for each location, with costs on the vertical axis of the graph and
          annual volume on the horizontal axis.

    3)  Select the location that has the lowest total cost for the expected production volume.
 

The following is an example of how the locational break-even analysis is done mathematically.
 

This example shows how locational break-even analysis provides us with a location that will yield the lowest cost of doing business.


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