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Question

Weight X coord Y coord
Location 1 3 2 10
Location 2 2 6 8
Location 3 4 4 9
Location 4 1 9 5
Location 5 3 8 1
Location 6 2 3 2
Location 7 1 2 6
Sum 16 34 41
Average 4.857 5.857
Weighted Average 4.6875 6.25

Key Term: Center-of-gravity method

36) 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. Identify the range over which each location is best.


Location
Costs A B C
Fixed $700,000 $1,000,000 $1,1000,000
Variable $28 $18 $20

Answer: A is cheapest from 0 to about 30,000 units. B is cheapest thereafter. C can never be preferred.


Break-even points Units Dollars
Location A vs. Location B 30,000 $1,540,000
Location A vs. Location C 50,000 $2,100,000
Location B vs. Location C -50,000 $100,000

Key Term: Locational cost-volume analysis

37) A manufacturing firm is considering three potential locations for a new parts manufacturing facility. A consulting firm has assessed three sites based on the four factors supplied by management as critical to the location's success. Given the management-supplied factor weights and the consultant team scores, which location should be selected? Scores are based on 50 = best.


Location
Factor Weight A B C
Labor Climate 10 35 45 20
Taxes 30 30 40 40
Utilities 20 25 20 45
Wages 40 10 25 25

Answer: C is clearly better than either A or B. This problem illustrates the importance of having good scores on important factors. B has scores that sum to the same amount as those of C, but they are in the wrong places.

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