However gfmc predicts that there would be about a 60

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Unformatted text preview: cient capacity to meet even the largest projections for sales of the Vector. However, if sales are only moderate, the plant would be underutilized and therefore less efficient. This is a new design, so sales are hard to predict. However, GFMC predicts that there would be about a 60% chance of strong sales (annual sales of 100,000), and a 40% chance of moderate sales (annual sales of 50,000). The average revenue per Vector sold is $30,000. Production costs per vehicle for the two production options depend upon sales, as indicated in the table below. Shared Plant in Indiana Dedicated Plant in Georgia Moderate Sales 16 Strong Sales 22 20 24 The amortized annual cost of plant construction and other associated fixed costs for the Georgia plant would total $400 million per year (regardless of sales volume). The...
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