Exam 10: Location Strategies

The owner of a millwork shop is considering three alternative locations for a new plant for building embossed-and-clad steel exterior doors for residences. Fixed and variable costs follow. Since the plant ships nationwide, revenue is assumed the same regardless of plant location. Plot the total cost lines in the chart provided below, and identify the range over which each location is best. Location Costs Fixed \ 700,000 \ 1,000,000 \ 1,1000,000 Variable \ 28 \ 18 \ 20

Location A would result in annual fixed costs of $300,000 and variable costs of $55 per unit. Annual fixed costs at Location B are $600,000 with variable costs of $32 per unit. Sales volume is estimated to be 30,000 units per year. Which location has the lower cost at this volume? How large is its cost advantage? At what volume are the two facilities equal in cost?

A telecommunications firm is planning to lay fiber optic cable from several community college distance learning sites to a central studio, in such a way that the miles of cable are minimized. Some locations require more than one set of cables (these are the loads). Where should the studio be located to accomplish the objective? College Map Coordinate (,) Load A (2,10) 3 B (6,8) 2 C (4,9) 4 D (9,5) 1 E (8,1) 3 F (3,2) 2 G (2,6) 1

A small producer of music boxes wants to move to a larger facility. Two alternative facilities have been found. Site 1 has a fixed cost of $500,000 per year, with a variable cost of $25 per unit. Site 2 has a fixed cost of $800,000 per year, but a variable cost of $22 per unit. a. Write out the equation for total cost for each site. b. At what volume of output would the two locations have the same total cost? c. For what range of output would Site 1 be superior? d. For what range of output would Site 2 be superior?

Which of the following statements regarding FedEx is true?

A manufacturing company is considering two alternative locations for a new facility. The fixed and variable costs for the two locations are found in the table below. For which volume of business would the two locations be equally attractive? If the company plans on producing 50,000 units, which location would be more attractive? Glen Rose Mesquite Fixed Costs \ 1,000,000 \ 1,500,000 Variable Costs (\ per unit) 25 23

How do service facility location decisions differ from industrial location decisions in terms of the techniques used to analyze them?

Industrial location analysis typically attempts to

Traffic counts and demographic analysis of drawing areas are associated with

Consider the list of Key Success Factors in your textbook. From items on that list, select two which might involve ethical issues or issues of social responsibility, and cite a possible example of each. Write a brief explanation of each of your examples. Cite and describe a third example, from an area not covered by the KSFs.

Which of the following statements regarding the center-of-gravity method is False?

The transportation model calculates an optimal shipping system between a central facility and several outlying customers.

A small manufacturer is considering several locations for a new facility. They have identified four factors that they consider to be important for their location decision. They have decided to assign scores to the four factors, with a higher score indicating a more favorable location. Use the information in the following table to perform a factor rating to select the best location. Weight Location A Location B Location C Wages 40 30 75 90 Labor Climate 30 40 70 40 Taxes 15 80 40 90 Utilities 15 75 60 10

The graphic approach to location break-even analysis displays the range of volume over which each location is preferable.

Motorola is in an industry where there are intense pressures to keep costs low. Why did Motorola reject a possible location that offered low manufacturing costs?

A manufacturer of stamped metal auto parts has four parts factories in one city at the location coordinates shown below. Each coordinate unit represents a city block (roughly 100 meters). The yearly demand at each factory is also given. Factories Demand X-Coord. Y-Coord. Rayburn Industrial Park 19,000 20 130 Port of Zavalla 3,000 60 40 Henderson Mfg. Center 5,000 70 100 Wax Mills Site 6,000 90 30 Management has decided to build a new sheet metal mill, to supply these factories, at a location central to these plants. What should be the map coordinates of the new plant? On the grid below, graph the locations of the four parts factories and the proposed sheet metal mill.

Identify the four major quantitative methods for solving location problems.

When making a location decision at the region/community level, which of these would be considered?

The ratio of labor cost per day to productivity, in units per day, is the labor cost per unit.

A county wants to build one centrally-located processing facility to serve the county's four recycling drop-off locations. The four drop-offs have characteristics as given in the table below. What is the approximate center of gravity of these four locations? Location X-coordinate Y-coordinate Tonnage Drop-off point A 1 8 10 Drop-off point B 6 7 35 Drop-off point C 6 2 25 Drop-off point D 4 7 50