The upholstered household furniture industry (SIC 25 12) is extremely important in the economies of Alabama, Mississippi, North Carolina, and Tennessee. This study uses a comparative cost approach to assess the differences that exist in the manufacturing and distribution of upholstered wood household furniture among southeast U.S. states. Secondary data for raw material, labor, and transportation costs were obtained from the U.S. Department of Commerce, Bureau of the Census, for 1982, 1987, and 1992. Total costs were estimated for raw material, labor, and transportation of the finished products. A simple cost index was constructed for each cost component. Analysis of variance and multiple regression were applied to examine the significance and sensitivity of the cost components as they related to the value of shipments. An additional five states were added to add robustness to the data set during sensitivity analysis. A comparison of the simple cost index among states indicated that Alabama has a small, nonprofitable industry. To be competitive the State of Alabama needs to improve the business climate for the manufacturing of upholstered furniture. Manufacturers of upholstered furniture in Mississippi depend upon North Carolina for the supply of non-wood materials. Policy makers in Mississippi should develop specific incentives to create an excellent business location for suppliers of non-wood materials in northeast Mississippi. When several parameters of the initial model were altered by 10, 25, and 50 percent, the results revealed that overall the upholstered household furniture industry in the southeastern U.S. is not sensitive to change.
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