Q&A Hero

Question

Weight Barclay Chester
Factor 1 40 75 70
Factor 2 0.25 60 80
Factor 3 0.15 45 90
Factor 4 0.20 80 65
Total 1.00
Weighted sum 67.75 74.5
Weighted average 67.75 74.5

Key Term: Factor-rating method

30) 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

Answer: Crossover is at 250,000 units. Below the crossover, Glen Rose must be cheaper as it has the lower fixed cost. Thus, for an estimated unit volume of 50,000, Glen Rose should be chosen.


Break-even points Units Dollars
Option 1 vs. Option 2 250,000 7,250,000
Volume analysis at 50,000 units
Option 1 Option 2
total cost $2,250,000.00 $2,650,000.00

Key Term: Locational cost-volume analysis

31) East Texas Seasonings is preparing to build one processing center to serve its four sources of seasonings. The four source locations are at coordinates shown below. Also, the volume from each source is provided.

a. Calculate the volume-weighted center of gravity.

b. Calculate the simple center of gravity (all cities weighted equally).

c. Explain why the two calculations differ.


X-coordinate Y-coordinate Volume
Athens, Texas 30 40 100
Beaumont, Texas 20 15 400
Carthage, Texas 55 60 150
Denton, Texas 20 70 250

Answer: The weighted center of gravity is located at X = 24,250 / 900 = 26.9, Y = 36,500 / 900 = 40.6. The simple center of gravity is located at X = 125 / 4 = 31.25. Y = 185 / 4 = 46.25. The simple center is more to the east and north than the weighted center of gravity. A partial explanation is that the heaviest tonnage is from Beaumont, which is far to the west and south. Its influence pulls the weighted center toward the west and south.

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