Question

East Texas Seasonings Solutions
Weighted # trips x-coord y-coord X multiplied Y multiplied
A 30. 40. 3,000. 4,000.
B 400. 20. 15. 8,000. 6,000.
C 150. 55. 60. 8,250. 9,000.
D 250. 20. 70. 5,000. 17,500.
Total 900. 125. 185. 24,250. 36,500.
Average 31.25 46.25
Weighted Average 26.9444 40,5556
Median 450. 20. 40.

Key Term: Center-of-gravity method

32) 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?

Answer: At 30,000 units, Location A has total costs of $1,950,000, while Location B has total costs of $1,560,000. Location B is cheaper by $390,000. The crossover occurs where 600,000 + 32X = 300,000 + 55X, or at X = 300,000 / 23 = 13,043 units

Key Term: Locational cost-volume analysis

33) Using the factor ratings shown below, determine which location alternative should be chosen on the basis of maximum composite score.

Answer

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