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Exam 8: Location Planning and Analysis

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Question 31

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A manager must decide between two location alternatives, Boston and Chicago. Boston would have annual fixed costs of $70,000, transportation costs of $60 per unit, and labor and material costs of $200 per unit. Chicago would have annual fixed costs of $90,000, transportation costs of $40 per unit, and labor and material costs of $170 per unit. Revenue will be $300 per unit. (A) Which alternative would yield the higher profit for an annual demand of 3,000 units? (B) Would the two locations yield the same profit at a certain volume? If so, at what volume would that be?

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Question 32

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Location options do not usually include:

A) expansion.
B) a contract.
C) adding new facilities.
D) moving.
E) doing nothing.

F) C) and E)
G) C) and D)

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Question 33

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A location analysis has been narrowed down to three locations. The critical factors, their weights, and the ratings for each location are shown below: $\begin{array} {c} \quad\quad\quad\quad\quad\quad\quad\quad{ \text { Location } } \\\begin{array} { l c c c c } \text { Factor } &\text { Wt. } & \text { A } & \text { B } & \text { C } \\\hline \text { Labor Cost } & .4 & 70 & 80 & 90 \\\text { Transportation Cost } & .2 & 80 & 80 & 60 \\\text { Market Access } & .2 & 90 & 70 & 60 \\\text { Raw Materials Cost } & .1 & 50 & 70 & 90 \\\text { Utility Cost } & .1 & 80 & 90 & 70\end{array}\end{array}$ If the decision rule is to select the location with the greatest composite score exceeding 80, management should choose:

The first step in developing location alternatives is identifying important factors.

An approach to location analysis that can include both qualitative and quantitative considerations is:

Which of the following is least important as a consideration for a firm at the beginning of a supply chain?

The center of gravity method is used to _______ travel time, distance, and costs.

Consider the following information about sites A, B, and C: $\begin{array} { l r l } \text { Site } & \text { FC (annual) } & \text { VC (per unit) } \\\hline \text { A } & \$ 100,000 & \$ 10 \\\mathrm {~B} & \$ 120,000 & \$ 8 \\\text { C } & \$ 150,000 & \$ 7\end{array}$ For what range of output would you prefer site C?

The Skulls, a student social organization, has two different locations under consideration for constructing a new chapter house. The Skulls' president, a POM student, estimates that due to differing land costs, utility rates, etc., both fixed and variable costs would be different for each of the proposed sites, as follows: $\begin{array}{lcl}\text { Location } & \begin{array}{r}\text { Annual } \\\text { Fixed }\end{array} & \text { Variable } \\\hline \text { Alpha Ave. } & \$ 5,000 & \$ 200 \text { per person } \\\text { Beta Blvd. } & \$ 8,000 & \$ 150 \text { per person }\end{array}$ What would be the total annual costs for the Alpha Ave. location with 20 persons living there?

Advanced communications has aided globalization.

Which of the following is not a location option that management can consider in location planning?

Labor laws are an important site-related factor.

For service and retail stores, a prime factor in location analysis is customer access.

The method for evaluating location alternatives that minimizes shipping costs between multiple sending and receiving locations is:

An example of a regional factor in location planning is the location of our markets (either existing or potential).

A manufacturing firm is considering two locations for a plant to produce a new product. The two locations have fixed and variable costs as follows: $\begin{array} { l r l } \text { Location } & \mathrm { FC } \text { (annual) } & \mathrm { VC } \text { (per unit) } \\\hline \text { Atlanta } & \$ 80,000 & \$ 20 \\\text { Phoenix } & \$ 140,000 & \$ 16\end{array}$ At what annual output would the company be indifferent between the two locations?

Retail businesses generally prefer locations that are not near other retailers, as this reduces their competition.

In location planning, the location of raw materials, the location of markets, and labor factors are:

Location choice I has monthly fixed costs of $100,000 and per-unit variable costs of $10. Location choice J has monthly fixed costs of $150,000 and per-unit variable costs of $9. At what volume would these locations have equal total costs?

In regards to supply chain management and the location decision, a primary challenge is to address _______________ distribution.