OPERATIONS MANAGEMENT W/ CNCT+
12th Edition
ISBN: 9781259574931
Author: Stevenson
Publisher: MCG CUSTOM
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Chapter 8, Problem 6P
Summary Introduction
To determine: The alternative that yields the lowest total cost for expected volume of 10,000 units.
Introduction: Economic Analysis is an investigation of powers that decide the circulation of rare assets. It gives understanding into how showcases work, and offers strategies for endeavoring to foresee future market conduct because of occasions, patterns, and cycles.
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A firm that has 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 given the following information: Annual costs for building, equipment, and administration would be $40,000 for Memphis, $60,000 for Biloxi, and $100,000 for Birmingham. Labor and materials are expected to be $8 per unit in Memphis, $4 per unit in Biloxi, and $5 per unit in Birmingham. The Memphis location would increase system transportation costs by $50,000 per year, the Biloxi location by $60,000 per year, and the Birmingham location by $25,000 per year. Expected annual volume is 10,000 units.
A 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 _________________
An operations manager narrowed the search for a new facility location to four communities. The annual fixedcosts (land, property taxes, insurance, equipment, and buildings) and the variable costs (labor, materials, trans-portation, and variable overhead) are as follows:
Notice that no community dominates the set of alternatives; that is, no community has both the lowestfixed costs and the lowest variable costs per unit. If that were so, that community would be the best location.Step 1. Plot the total cost curves for all the communities on a single graph. Identify on the graph theapproximate volume range over which each community provides the lowest cost.Step 2. Using break-even analysis, calculate the break-even quantities over the relevant ranges. If theexpected demand is 15,000 units per year, what is the best location?
Chapter 8 Solutions
OPERATIONS MANAGEMENT W/ CNCT+
Ch. 8.5 - Prob. 1RQCh. 8.5 - Prob. 2RQCh. 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. 6DRQ
Ch. 8 - Prob. 7DRQCh. 8 - Prob. 8DRQCh. 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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