Wile E. Coyote has placed an order for 30 tons of TNT from Acme Enterprises. Acme can manufacture TNT using raw materials (Z) found in a remote underground mine. Acm needs 1/3 ton of Z to produce 1 ton of TNT and they are deciding where to locate their factory in order to minimize transportation costs. The mine and Wile E. Coyote's house are 50 miles apart. By train, the cost of shipping 1 ton of both TNT and Z is $2 per mile. However, Acme faces an additional cost because a river passes between the mine and Wile E. Coyote's house, and the river has no bridge. Wile E. Coyote's House River Mine Both Z and TNT must be loaded onto barges to cross the river, which is located 16 miles from the mine. Barge operators charge $1 per ton of TNT shipped across the river. However, since the raw material Z is highly explosive when mixed with water, barge operators charge Acme $195 to ship one ton of Z across the river. Using the above information, find the transport-cost-minimizing location for Acme's TNT factory. The answer can be found by computing transport costs at four locations: the mine, Wile E. Coyote's house, the mine side of the river, and Wile E. Coyote's side of river. Assume that the width of the river is negligible, so that it can be ignored.
Wile E. Coyote has placed an order for 30 tons of TNT from Acme Enterprises. Acme can manufacture TNT using raw materials (Z) found in a remote underground mine. Acm needs 1/3 ton of Z to produce 1 ton of TNT and they are deciding where to locate their factory in order to minimize transportation costs. The mine and Wile E. Coyote's house are 50 miles apart. By train, the cost of shipping 1 ton of both TNT and Z is $2 per mile. However, Acme faces an additional cost because a river passes between the mine and Wile E. Coyote's house, and the river has no bridge. Wile E. Coyote's House River Mine Both Z and TNT must be loaded onto barges to cross the river, which is located 16 miles from the mine. Barge operators charge $1 per ton of TNT shipped across the river. However, since the raw material Z is highly explosive when mixed with water, barge operators charge Acme $195 to ship one ton of Z across the river. Using the above information, find the transport-cost-minimizing location for Acme's TNT factory. The answer can be found by computing transport costs at four locations: the mine, Wile E. Coyote's house, the mine side of the river, and Wile E. Coyote's side of river. Assume that the width of the river is negligible, so that it can be ignored.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 9E
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Question
Transcribed Image Text:Wile E. Coyote has placed an order for 30 tons of TNT from Acme Enterprises.
Acme can manufacture TNT using raw materials (Z) found in a remote underground mine. Acme
needs 1/3 ton of Z to produce 1 ton of TNT and they are deciding where to locate their factory
in order to minimize transportation costs. The mine and Wile E. Coyote's house are 50 miles
apart.
By train, the cost of shipping 1 ton of both TNT and Z is $2 per mile. However, Acme faces an
additional cost because a river passes between the mine and Wile E. Coyote's house, and the
river has no bridge.
Wile E.
Coyote's
House
River
Mine
Both Z and TNT must be loaded onto barges to cross the river, which is located 16 miles from
the mine. Barge operators charge $1 per ton of TNT shipped across the river. However, since
the raw material Z is highly explosive when mixed with water, barge operators charge Acme
$195 to ship one ton of Z across the river.
Using the above information, find the transport-cost-minimizing location for Acme's TNT
factory. The answer can be found by computing transport costs at four locations: the mine,
Wile E. Coyote's house, the mine side of the river, and Wile E. Coyote's side of river. Assume
that the width of the river is negligible, so that it can be ignored.
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