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Consider the Figure. There are two sources of supply: A and B. The market boundary occurs at Y where the LDC from A is the same as B. In the example shown in Figure the distance between A and B is 100 miles. If we let the distance from A to Y be X miles, then the distance from B to Y is (100-X) miles. Assume supply A is the factory and supply B is a distribution center. Assume the product cost at A is $100 and product cost from B is $100 plus TL transportation from A to B and inventory costs at B. For this example, assume the TL transportation and inventory carrying costs are $10 per unit so the product cost from B is $110. Transportation costs from either A or B are $0.40 per unit per mile. Determine the Market Boundary? 100 Miles (100 – X) Miles X Miles A Y

Consider the Figure. There are two sources of supply: A and B. The market boundary occurs at Y where the LDC from A is the same as B. In the example shown in Figure the distance between A and B is 100 miles. If we let the distance from A to Y be X miles, then the distance from B to Y is (100-X) miles. Assume supply A is the factory and supply B is a distribution center. Assume the product cost at A is $100 and product cost from B is $100 plus TL transportation from A to B and inventory costs at B. For this example, assume the TL transportation and inventory carrying costs are $10 per unit so the product cost from B is $110. Transportation costs from either A or B are $0.40 per unit per mile. Determine the Market Boundary? 100 Miles (100 – X) Miles X Miles A Y

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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From the figure, find the market boundary.

Consider the Figure. There are two sources of supply: A and B. The market boundary occurs at Y where the LDC from A is the same as B. In the example shown in Figure the distance between A and B is 100 miles. If we let the distance from A to Y be X miles, then the distance from B to Y is (100-X) miles. Assume supply A is the factory and supply B is a distribution center. Assume the product cost at A is $100 and product cost from B is $100 plus TL transportation from A to B and inventory costs at B. For this example, assume the TL transportation and inventory carrying costs are $10 per unit so the product cost from B is $110. Transportation costs from either A or B are $0.40 per unit per mile. Determine the Market Boundary? 100 Miles (100 – X) Miles Miles A Y
Transcribed Image Text:Consider the Figure. There are two sources of supply: A and B. The market boundary occurs at Y where the LDC from A is the same as B. In the example shown in Figure the distance between A and B is 100 miles. If we let the distance from A to Y be X miles, then the distance from B to Y is (100-X) miles. Assume supply A is the factory and supply B is a distribution center. Assume the product cost at A is $100 and product cost from B is $100 plus TL transportation from A to B and inventory costs at B. For this example, assume the TL transportation and inventory carrying costs are $10 per unit so the product cost from B is $110. Transportation costs from either A or B are $0.40 per unit per mile. Determine the Market Boundary? 100 Miles (100 – X) Miles Miles A Y
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