Concept explainers
a)
To determine: The volume of output at same total cost.
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)
To determine: The range of output.
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.
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Chapter 8 Solutions
CONNECT F/OPERATIONS MGMT
- A 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_forwardIf the labor cost per day for Location A is $8,000 with a production of 40 units per day, and the cost per day of Location B is $9,000 with a production of 30 units per day, what is the labor cost per unit for locations A and B? Which location is more cost-efficient? Given the information in the following table, what is the weighted rating score for locations A, B, and C? Which location would you recommend based on this analysis?arrow_forwardA firm is considering three different locations in which to build a factory. The costs associated with each location are given below. Location A B C Fixed Costs 500 700 900 Variable costs per unit 10 6 4 Plot the crossover chart for the locations. What level of output will each location be preferred? Write an equation to represent the costs for each location. Use algebra to determine the crossover points.arrow_forward
- A small producer of machine tools wants to move to a larger building, and has identified two alternatives.Location A has annual fixed costs of $700,000 and variable costs of $13,000 per unit; locationB has annual fixed costs of $820,000 and variable costs of $13,000 per unit. The finished items sellfor $17,000 each.a. At what volume of output would the two locations have the same total cost?b. For what range of output would location A be superior? For what range would B be superior?arrow_forwardSarah is a designer, but her passion is to paint. To pursue her passion Sarah would like to have an exhibition of her art work for a week. She contacts four landlords with a proposal of renting their places for a week and to her surprise all 4 accept the idea. Characteristics of each location are as follows: Sarah wants to know if people like her paintings enough to buy them. Decision objectives:1- Space not less than 600ft2.2- Location3- Decoration4- Facilities5- Overall budget including rent for one week not to exceed $300 Which store is Sarah going to choose for her art exhibition? Explain your chain of thoughts and the process.arrow_forwardWhich of the following explain the need for facility location selection?(a) When the existing business unit has outgrown its original facilities and expansion is not possible.(b) When a business is newly started.(c) When the lease expires and the landlord does not renew the lease.(d) All of thesearrow_forward
- A small machine tool manufacturer is looking for a larger space and has come up with two options. Annual fixed costs for location A are $800,000, with variable costs of $14,000 per year; annual fixed costs for location B are $920,000, with variable costs of $13,000 per unit. Each finished object is worth $17,000. a. At what amount of production will the net expense of the two sites be the same? b. For what production spectrum will position A be preferable? What range will B be better in?arrow_forwardA retired auto mechanic hopes to open a rustproofing shop. Customers would be local new-car dealers. Two locations are being considered, one in the center of the city and one on the outskirts. The central city location would involve fixed monthly costs of $7,000 and labor, materials, and transportation costs of $30 per car. The outside location would have fixed monthly costs of $4,700 and labor, materials, and transportation costs of $40 per car. The dealer price at either location will be $90 per car. a. Which location will yield the greatest profit if monthly demand is (1) 200 cars? (2) 300 cars?b. At what volume of output will the two sites yield the same monthly profit? Can you show me the steps in excel?arrow_forwardA firm is considering three different locations in which to build a factory. The costs associated with each location are given below. Location A B C Fixed Costs 500 700 900 Variable costs per unit 10 6 4 2. What level of output will each location be preferred? 3. Write an equation to represent the costs for each location. 4. Use algebra to determine the crossover pointsarrow_forward
- The following table shows the fixed cost and variable cost for 3 locations. Construct cost curves for these 3 locations for production from 0 to 200 units at 20 units intervals. What would be the range of production units that would give Location A a competitive advantage? What would be the range for Location B and Location C, respectively?arrow_forwardOn the cost–volume analysis chart where the costs of twoor more location alternatives have been plotted, the quantity at which two cost curves cross is the quantity at which:a) fixed costs are equal for two alternative locations.b) variable costs are equal for two alternative locations.c) total costs are equal for all alternative locations.d) fixed costs equal variable costs for one location.e) total costs are equal for two alternative locations.arrow_forwardWe need to find better places to sell our product. I have three ideas we could pursue, but each one requires a six month commitment. We also have our$1,200budget constraint, which must cover any required location permits. Review the location choices to your right. Remember the cost for any permits will be deducted from the$1,200marketing budget. Great ideas Ariel, but I'm not sure which one would be best. What do you think, ? Silas Lee Which question would you like to ask before making your decision?City Center Park Cost: \$600 for a six-month permit Considerations - Downtown city center park within walking distance of many large corporate office buildings. - This is a very popular park. When the weather is good many business people tend to congregate and eat lunch here. - Several other food trucks do frequent this area.Which community events this past summer generated the most sales? Any ideas why? How would you and Ariel describe the demographics of our past customers?arrow_forward
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