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A newly formed firm must decide on a plant location. There are two alternatives under consideration: locate near the major raw
materials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than
locating near the market, but the owners believe there would be a loss in sales volume because customers tend to favor local
suppliers. Revenue per unit will be $189 in either case.

Omaha

Kansas City

Annual fixed costs ($ millions)

$

1.0

$

1.0

Variable cost per unit

$

32

$

46

Expected annual demand (units)

9,350

11,450

Using the above information, determine which location would produce the greater profit. (Omit the
“$” sign in your response.)

(Click to select)

Omaha

Kansas City

would produce the greater gross profit of $ .

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