Concept explainers
a)
To determine: The location that will yield the greatest profit if monthly demand is 200 and 300 cars respectively.
Introduction: Location is where a firm chooses to site its operations. Location decisions can 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.
a)
Answer to Problem 7P
Explanation of Solution
Given Information:
It is given that the fixed monthly costs of location inside the city are $7,000 and location outside the city is $4,700. The variable costs for location inside the city are $30 per car and for location outside is $40. The dealer price per car is $90. The monthly demands are 200 and 300 cars.
Calculate the total profit of location that will yield the greatest profit if the monthly demand is 200.
It is calculated by subtracting dealer price with variable cost and the result is multiplied with monthly demand and the whole result is subtracted with fixed costs.
From the results obtained Location Out yield the greatest profit if the monthly demand is 200 with $5,300 compared to Location Cit which is $5,000.
Hence location that will yield the greatest profit if the monthly demand is 200 is Location Out.
Calculate the total profit of location that will yield the greatest profit if the monthly demand is 300.
Given Information:
It is given that the fixed monthly costs of Location Cit are $7,000 and Location Out is $4,700. The variable costs for Location Cit are $30 per car and Location Out is $40. The dealer price per car is $90. The monthly demands are 200 and 300 cars.
It is calculated by subtracting dealer price with variable cost and the result is multiplied with monthly demand and the whole result is subtracted with fixed costs.
From the results obtained location city yield the greatest profit if the monthly demand is 300 with $10,300 compared to location city which is $11,000.
Hence, location that will yield the greatest profit if the monthly demand is 300 is location city.
b)
To determine: The volume of output with the two locations yield the same monthly profit.
Introduction: Location is where a firm chooses to site its operations. Location decisions can 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.
b)
Answer to Problem 7P
Explanation of Solution
Given Information:
It is given that the fixed monthly costs of Location City are $7,000 and Location Out is $4,700. The variable costs for Location Cit are $30 per car and Location Out is $40. The dealer price per car is $90. The monthly demands are 200 and 300 cars.
Calculate the volume of output with the two locations yield the same monthly profit.
The total units are denoted as Q. Solving for Q,
Hence, the volume of output with the two locations yield the same monthly profit is 230 cars.
Want to see more full solutions like this?
Chapter 8 Solutions
EBK OPERATIONS MANAGEMENT
- Shoeless Joe is a specialty retailer that is deciding where tolocate a new facility. Th e annual fi xed and variable costs for eachpossible site have been estimated as follows: If demand is expected to be 2000 units, which location is best?arrow_forwardA manager must decide between two location alternatives, Boston and Chicago. Boston would have annual fixed costs of $70000, transportation costs of $60 per unit, and labor and material costs of $200 per unit. Chicago would have annual fixed costs of $90000, transportation costs of $40 per unit, and labor and material costs of $170 per unit. Revenue will be $300 per unit. 1. Which alternative would yeild the higher profit for an annual demand of 3000 units? 2. Would the two locations yeild the same profit at a certain volume? If so, at what volume would that be?arrow_forwardA small firm produces and sells novelty items in a five-barangay area. The firm expects to consolidate assembly of its greeting cards line at a single location. Currently, operations are in three widely scattered locations. The leading candidate for location will have a monthly fixed cost of Php42, 000 and variable costs of Php3 per card. Cards sell for Php7 each. Prepare a table that shows total profits, fixed costs, variable costs, and revenues for monthly volumes of 10,000, 12,000, and 15,000 units. What is the break-even point?arrow_forward
- The piece of land available is situated on the main road through the area and has great views of MountKinabalu on one side and the valley below on the other side. As the strategic advisor you have been asked to come up with a recommendation whether to develop a 4-star or 5-star property. Due to the fact that the area is near a World Heritage site and due to building height restrictions the total number of rooms for a 4-star hotel would be 300 rooms, whilst for a 5-star property the number of rooms would be 190. Identify at least THREE (3) strengths and weaknesses each and at least TWO (2) opportunities and threats each for the proposed hotel/resort at that area. (Not for Mount Kinabalu as a tourist attraction!)arrow_forwardAn operations manager wants to use factor rating method to decide the location of a new restaurant. Weights of the three factors specified, and the scores of two options are shown in the table below. Which option should the operations manager choose and what is the weighted score of this option? Factor Weight Option 1 Score Option 2 Score Proximity to the University 0.5 90 80 Rental Cost 0.3 80 100 Size 0.2 70 70 Option 2, weighted score = 84 Option 2, weighted score = 83 Option 1, weighted score = 83 There is no difference between the two options Option 1, weighted score = 84arrow_forwardA company that produces pleasure boats has decided to expand one of its lines. Current facilities are insufficient to handle the increased workload, so the company is considering three alternatives. A (new location), B (subcontract), and C (expand existing facilities). Alternative A would involve substantial fixed costs but relatively low variable costs: fixed costs would be $315,000 per year, and variable costs would be $600 per boat. Subcontracting would involve a cost per boat of $2,580, and expansion would require an annual fixed cost of $58,000 and a variable cost of $1,040 per boat. a. Find the range of output for each alternative that would yield the lowest total cost. (Leave no cells blank be certain to enter "0" wherever required. Round your answers to the nearest whole number.) A B C or to OA OB OC to more b. Which alternative would yield the lowest total cost for an expected annual volume of 90 boats? c. What other factors might be considered in choosing between expansion…arrow_forward
- A company that produces pleasure boats has decided to expand one of its lines. Current facilities are insufficient to handle the increased workload, so the company is considering three alternatives, A (new location), B (subcontract), and C (expand existing facilities).Alternative A would involve substantial fixed costs but relatively low variable costs: fixed costs would be $260,000 per year, and variable costs would be $610 per boat. Subcontracting would involve a cost per boat of $2,570, and expansion would require an annual fixed cost of $61,000 and a variable cost of $1,090 per boat.arrow_forwardLocation A would result in annual fixed costs of $300,000 and variable costs of $55 per unit. Annual fixed costs at Location B are $600,000 with variable costs of $32 per unit. Sales volume is estimated to be 30,000 units per year. Which location has the lower cost at this volume? How large is its cost advantage? At what volume are the two facilities equal in cost?arrow_forwardThe 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 $1.76 per sandwich. Sandwiches sell for $8.00 each in all locations. Rent and equipment costs would be $5,000 per month for location A, $5,500 per month for location B, and $5,800 per month for location C. a. Determine the volume necessary at each location to realize a monthly profit of $10,000. (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 21,000 per month, 22,000 per month, and 23,000 per month, respectively, calculate the profit of the each locations? (Do not round intermediate calculations. Round your answer to the nearest whole number.) e to search Location Monthly Profits O J SA O ? 75°F Partly cloudy 8 O P T Y H J CVBNMU L alt ctri pausearrow_forward
- 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 $1.76 per sandwich. Sandwiches sell for $8.00 each in all locations. Rent and equipment costs would be $5,000 per month for location A, $5,500 per month for location B, and $5,800 per month for location C. a. Determine the volume necessary at each location to realize a monthly profit of $10,000. (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 21,000 per month, 22,000 per month, and 23,000 per month, respectively, calculate ge profit of the each locations? (Do not round Intermediate calculations. Round your answer to the nearest whole number.) Location A Monthly Profits B C b-2. Which location would yield the greatest profits? e here to search R T J O…arrow_forwardDuring a major expansion in 2004, Douwalla’s Import Company developed a new processing line for which the delivered equipment cost was $1.75 million. This year, the board of directors decided to expand into new markets and expects to build the current version of the same line. Estimate the cost if the following factors are applicable: construction cost factor is 0.20, installation cost factor is 0.50, indirect cost factor applied against equipment is 0.25, and the total plant cost index has risen from 2509 to 3713 over the years.arrow_forwardA firm that recently experienced an enormous growth rate is seeking to lease a small plant in Memphis, TN; Biloxi MS; or Birmingham, AL. Prepare an economic analysis of the three locations giving the following information. Annual costs for building, equipment, and administration would be $64,000 for Memphis, $74,000 for Biloxi, and $109,000 for Birmingham. Labor and materials are expected to be $7 per unit in Memphis, $6 per unit in Biloxi, and $6 per unit in Birmingham. The Memphis location would increase system transportation costs by $63,000 per year, the Biloxi location by $73,500 per year, and the Birmingham location by $25,900 per year. Expected annual volume is 14,900 units. Total Cost Memphis _______________ Biloxi _______________ Birmingham _________________arrow_forward
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,Operations ManagementOperations ManagementISBN:9781259667473Author:William J StevensonPublisher:McGraw-Hill EducationOperations and Supply Chain Management (Mcgraw-hi...Operations ManagementISBN:9781259666100Author:F. Robert Jacobs, Richard B ChasePublisher:McGraw-Hill Education
- Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage LearningProduction and Operations Analysis, Seventh Editi...Operations ManagementISBN:9781478623069Author:Steven Nahmias, Tava Lennon OlsenPublisher:Waveland Press, Inc.