Operations Management
13th Edition
ISBN: 9781259667473
Author: William J Stevenson
Publisher: McGraw-Hill Education
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Chapter 8, Problem 1P
Summary Introduction
To determine: The location that would produce greater profit.
Introduction: Location is where a firm chooses to site its operations. Location decisions can have large effects on expenses and incomes. Location choices are normally quite imperative to both substantial and private companies. The area choice directly affects an operation's expenses and also its capacity to serve clients.
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Sam Hutchins is planning to operate a specialty bagel sandwich kiosk but is undecided about whether to locate in the downtown shopping plaza or in a suburban shopping mall. Based on the following data, which location would you recommend?
Location
Downtown
Suburban
Annual rent, including utilities
Expected annual demand (sandwiches)
Average variable costs per sandwich
Average selling price per sandwich
$12,000
30,000
$1.50
$3.25
$8,000
25,000
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The fixed and variable costs for four potential plant sites for Brent Snyder's Ski Supplies are shown here: a) Graph the total-cost lines for the four potential sites.b) Over what range of annual volume is each location the preferable one (that with lowest expected cost)?c) If expected volume of the ski equipment is 5,000 units, which location would you recommend?
A newly formed firm must decide on a plant location. There are 2 alternatives under consideration: locate near the major raw materials of locate near the the major customers. Locating near the raw materials will result in lower fixed costs and variable costs than locating near the market, but the owners believe ther would be a loss in sales volume because customers tend to favor local suppliers. Revenue per unit will be $185 in either case. Using the following information, determine which location would produce greater profit.. Annual Fixed costs Omaha $1.2 million, Kansas City $1.4 million Variable cost per unit Omaha $26, Kansas City $47 Expected annual demand Omaha 8000 units, Kansas City 12000 units.
Chapter 8 Solutions
Operations Management
Ch. 8.6 - Prob. 1RQCh. 8.6 - Prob. 2RQCh. 8 - Prob. 1DRQCh. 8 - Prob. 2DRQCh. 8 - Prob. 3DRQCh. 8 - Prob. 4DRQCh. 8 - Prob. 5DRQCh. 8 - Prob. 6DRQCh. 8 - Prob. 7DRQCh. 8 - Prob. 8DRQ
Ch. 8 - Prob. 9DRQCh. 8 - Prob. 1TSCh. 8 - Prob. 2TSCh. 8 - Prob. 3TSCh. 8 - Prob. 1CTECh. 8 - Prob. 2CTECh. 8 - Prob. 3CTECh. 8 - Prob. 4CTECh. 8 - Prob. 1PCh. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Prob. 5PCh. 8 - Prob. 6PCh. 8 - Prob. 7PCh. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - Prob. 11PCh. 8 - Prob. 12PCh. 8 - Prob. 13PCh. 8 - Prob. 14PCh. 8 - Prob. 15PCh. 8 - Prob. 1CQ
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- A supply chain manager faced with choosing among four possible locations has assessed each location according to the following criteria, where the weights reflect the importance of the criteria. Location Total Points 1 2 3 4 -Select- Criteria Raw material availability Infrastructure Transportation costs is the best location and -Select- Labor relations Quality of life Weight 0.09 0.08 0.35 0.11 0.37 Using this information, determine the best and the worst location. Round your answers to two decimal places. 1 P G VG OK OK is the worst location. Location 2 OK G G VG VG 3 G VG OK P P VG = Very good 5 pts; G = Good 4 pts; OK = Acceptable 3 pts ; P = Poor 1 pt. 4 G OK VG P OKarrow_forwardA firm is considering two location alternatives. At location C, fixed costs would be $4,000,000 per year, and variable costs $0.45 per unit. At alternative D, fixed costs would be $5,000,000 per year, with variable costs of $0.40 per unit. If annual deman is expected to be 20 million units, which plant offers the lowest total cost? Select one: a. Plant D, because Plant D is cheaper than Plant C for all volumes below 25 million units. O b. Neither Plant C nor Plant D, because the crossover point is at 20 million unit O c. Plant C, because Plant C is cheaper than Plant D for all volumes below 25 million units. Locational Co •X= Volume • Y= Cost • Cost depends or • Fixed cost y-in • Variable cost% D Locational Carrow_forwardA 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 compared to 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 $183 in either case. Omaha 1.0 33 10,050 Annual fixed costs ($ millions) Variable cost per unit. Expected annual demand (units) $ Kansas City $ Kansas City $ 0.9 $ 48 10,650 Click here for the Excel Data File Using the above information, determine which location would produce the greater profit. would produce the greater gross profit ofarrow_forward
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