location of new firms
Problem 8-1 A newly formed firm must decide on a plant location. There are two alternatives under consideration: locate near the major raw materials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than locating near the market, but the owners believe there would be a loss in sales volume because customers tend to favor local suppliers. Revenue per unit will be $189 in either case. Omaha Kansas City Annual fixed costs ($ millions) $ 1.2 $ 1.1 Variable cost per unit $ 39 $ 54 Expected annual demand (units) 10,350 10,950 ________________________________________ Using the above information, determine which location would produce the greater profit. (Omit the “$” sign in your response.
) Problem 8-2 The owner of Genuine Subs, Inc., hopes to expand the present operation by adding one new outlet. She has studied three locations. Each would have the same labor and materials costs (food, serving containers, napkins, etc.) of $2.80 per sandwich. Sandwiches sell for $3.60 each in all locations. Rent and equipment costs would be $5,850 per month for location A, $5,925 per month for location B, and $6,175 per month for location C. a. Determine the volume necessary at each location to realize a monthly profit of $12,250. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Location Monthly Volume A B C ________________________________________ b-1. If expected sales at A, B, and C are 23,250 per month, 26,250 per month, and 25,250 per month, respectively, calculate the profit of the each locations? (Omit the “$” sign in your response.) Location Monthly Profits ________________________________________ b-2. Which location would yield the greatest profits? • Location A • Location C • Location B
Problem 8-9 Location Score Factor (100 points each) Weight A B C Convenience .15 86 75 80 Parking facilities .20 70 86 96 Display area .18 88 90 91 Shopper traffic .27 86 90 95 Operating costs .10 95 91 96 Neighborhood .10 88 88 91 1.00 ________________________________________ a. Using the above factor ratings, calculate the composite score for each location. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Location Composite Score A B C ________________________________________ b. Determine which location alternative (A, B, or C) should be chosen on the basis of maximum composite score. • C • A • B
Problem 8-12 A toy manufacturer produces toys in five locations throughout the country. Raw materials (primarily barrels of powdered plastic) will be shipped from a new, centralized warehouse whose location is to be determined. The monthly quantities to be shipped to each location are the same. A coordinate system has been established, and the coordinates of each location have been determined as shown. Determine the coordinates of the centralized warehouse. (Round x ¯ x¯ and y ¯ y¯ to 1 decimal place.) Location (x,y) A 2,7 B 8,3 C 5,5 D 4,1 E 6,5 ________________________________________