A manufacturer produces some output called "Product" using a raw material called Input". To production of 1 ton of Product requires 3/5 ton of Input. The manufacturer has a contract to deliver 50 tons of Product to Store M (Store M is the "market" for Product). Input is available in Spot N (Spot N is the source of Input, equivalent to "mine" om the Spot N. The ship Product and Input are $2 per ton per mile. We will help the manufacturer to find the total transport-cost minimizing factory location. To arrive at the answer, go through the following steps in parts (a), (b) and (c). (a) First consider two potential locations for the factory: Spot N and Store M. Calculate shipping costs by filling in the cells of the table below. Show your calculations Location of Factory Spot N Store M Input Shipping Cost Total Shipping Cost

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
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 10E
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A manufacturer produces some output called "Product" using a raw material called
Input". To production of 1 ton of Product requires 3/5 ton of Input. The manufacturer
has a contract to deliver 50 tons of Product to Store M (Store M is the "market" for
Product). Input is available in Spot N (Spot N is the source of Input, equivalent to "mine"
om the Spot N. The ship
Product and Input are $2 per ton per mile. We will help the manufacturer to find the total
transport-cost minimizing factory location. To arrive at the answer, go through the
following steps in parts (a), (b) and (c).
(a) First consider two potential locations for the factory: Spot N and Store M.
Calculate shipping costs by filling in the cells of the table below. Show your
calculations
Location of Factory
Spot N
Store M
Input Shipping Cost
Total Shipping Cost
Transcribed Image Text:A manufacturer produces some output called "Product" using a raw material called Input". To production of 1 ton of Product requires 3/5 ton of Input. The manufacturer has a contract to deliver 50 tons of Product to Store M (Store M is the "market" for Product). Input is available in Spot N (Spot N is the source of Input, equivalent to "mine" om the Spot N. The ship Product and Input are $2 per ton per mile. We will help the manufacturer to find the total transport-cost minimizing factory location. To arrive at the answer, go through the following steps in parts (a), (b) and (c). (a) First consider two potential locations for the factory: Spot N and Store M. Calculate shipping costs by filling in the cells of the table below. Show your calculations Location of Factory Spot N Store M Input Shipping Cost Total Shipping Cost
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