The method for evaluating location alternatives that minimizes shipping costs
Review #1 Location Cost-Volume-Profit Analysis, which should help you to understand the financial aspects of choosing a location. In addition consider the factors that influences the location of a new facility. This is important because a poor choice can make it very difficult to meet demand and manage costs effectively. Show
Ch. 8 Location Planning and Analysis Location Planning Several factors that influence location positioning include the location of raw materials, proximity to the market, climate, and culture. Models for evaluating whether a location is best for an organization consist of cost-profit analysis for locations, the center of gravity model, the transportation model, and factor rating. This chapter discusses the decision to relocate a facility by considering costs and benefits. If you are planning on moving or acquiring a new facility, there are many factors to consider: the size, the geographic area, culture, transportation costs and others. After a location or locations have been chosen a cost-profit-volume analysis is done. The main factors that affect location decisions include regional factors, community considerations, and site-related factors. Community factors consist of quality of life, services, attitudes, taxes, environmental regulations, utilities, and development support. EVALUATING LOCATION ALTERNATIVES (Page 385)
where FC=Fixed Cost, v=Variable Cost per Unit, Q=Number of Units (Also shown below but not in the same format)
Company Relocating IDENTIFYING A COUNTRY, REGION, COMMUNITY, AND SITE (Page 376) v IDENTIFYING A COUNTRY v IDENTIFYING A REGION- 4 major considerations v IDENTIFYING A COMMUNITY v IDENTIFYING A SITE Note: The above part is way too lengthy for this assignment. Summary : There are several ways that are very helpful in evaluating location alternatives, such as locational cost-profit-volume analysis, factor rating, and the center of gravity method. First, let’s take a look at Location Cost-Profit-Volume Analysis. This analysis can be done numerically or graphically. The procedure for locational cost-profit-volume analysis involves these steps: 1. Determine the fixed and variable costs associated with each location alternative. This method assumes the following: Here’re a couple of important formulas to remember: Total cost = Fixed cost + Variable cost per unit * Quantity or volume of outputTotal profit = Quantity(Revenue per unit – Variable cost per unit) – Fixed costIn most situations, other factors besides cost must also be considered. We will now consider another kind of cost often considered in location decisions: transportation costs. Transportation costs sometimes play an important role in location decisions. The company can include the transportation costs in a locational cost-volume analysis by incorporating the transportation cost per unit being shipped into the variable cost per unit if a facility will be the sole source or destination of shipments. When there is a problem with shipment of goods from multiple sending points to multiple receiving points, and a new location is to be added to the system, the company should undertake a separate analysis of transportation. In this case, transportation model of linear programming is very helpful. The model is used to analyze each of the configurations considered, and it reveals the minumum costs each would provide. Then the information can be included in the evaluation of location alternatives. Multiple Plant Manufacturing Strategies (page 381-382)
2. Market Area Plant Strategy
3. Process Plant Strategy
4. General-Purpose Plant Strategy Plants are flexible and have the ability to handle a range of products
Show Answer answer is c. (found on page 191) . Question 2: Show Answer Answer: B. Pages 373-374. Question 3: Show Answer Answer: B. Page 369 Question 4: Show Answer Answer: D. Page 376. Question 5: Show Answer Answer: A. Page 388 1.) Location analysis assumes that both qualitative and quantitative factors are important in determining an ideal location when using: Show Answer Page 379 9th Ed. 2.) The transportation model can be applied to solve factors including: Show Answer Page 391 9th Edition 3.) The Transportation Model uses the following information to determine costs: Show Answer e. All of the above 4.) Which is a TRUE assumption needed to perform Cost-Profit Volume Analysis? Show Answer c. All costs are linear *9th Edition says that variable costs are linear, and fixed costs are constant.* 5.) In the Factor Rating Method of location analysis, which of the following is NOT a managerial choice? Question 5 needs an answer, also needs page numbers where answers are found 1) What does GIS stand for? Show Answer Answer: C 2)The primary consideration for identifying a site is? Show Answer Answer: E 3) What are the common techniques used to evaluate location alternatives? Show Answer Answer: E 4) What is a general-purpose plant strategy? Show Answer Answer: D 5) Method for locating a distribution center that minimizes the distribution costs. Show Answer Answer: A 1) What is a primary factor in the regional level of location decisions? Show Answer Answer: D page 365 (9th edition) 2) In a geographic information system (GIS), which is NOT involved in the data? Show Answer Answer: C page 366 (9th edition) 3) What is a disadvantage of globalization? Show Answer Answer: E page 373 (9th edition) 4) Mining operations, farming, forestry, and fishing are all examples of which primary reason for firms locating near or at the source of raw materials? Show Answer Answer: A page 365 (9th edition) 5) Which of the following would you establish a composite value for? Show Answer Answer: B page 379 (9th edition) 1. Which of these is a computer-based tool for collecting, storing, retrieving, and displaying demographic data on maps? Show Answer Answer: B page 379 2. Which is a major consideration when choosing to operate in a region? Show Answer Answer: C page 378 3. Considering global expansion, decision makers need to be absolutely clear on the benefits and risks and the likelihood of their occurrences when deciding upon identifying: Show Answer Answer: D page 378 4. A dominant factor that influences the location decision of a manufacturing firm is: Show Answer Answer: D page 376 5. Which of the following is Not a primary consideration when identifying a site for operations? Show Answer Answer: E page 381 1 . When using the Center of Gravity Method, what are the two differing variables for equal and unequal quantities shipped, respectively? Show Answer Answer: e ( pages 388-89 ) 2. Which location alternative technique involves viewing the problem in economic terms? Show Answer Answer: b ( page 385 ) 3. When considering foreign locations, crime, and the threat of terrorism fall under which category? Show Answer Answer: a ( page 378 ) 4. When using the factor rating method of location alternative evaluation, which of the following could be considered relevant factors? Show Answer Answer: e ( page 387 ) 5. Which of the following is not a step in the general procedure for making location decisions? Show Answer Answer: c ( page 376 ) Chapter 8 Summary: The location of a business is crucial to it’s growth. There are many factors that come into play when choosing a suitable location. Usually it is one or a few factors that dominate the decision making process. For example, a change in market supply and/or demand, perhaps even if inputs used by the business have run out. A business can suffer greatly if the right location is not chosen. Therefore a business should evaluate all their options very carefully before making a final conclusion. There are generally four options a manager has with regard to location planning. The first option would be to take the current facility and make it bigger. The second would be to keep the current facility and just create a (or many) new one(s). The third would be to close down the current facility entirely and build a new one. The last option would be to keep things the way they are. Questions: Questions need to be multiple choice format. 1. What is the name of the computer-based tool used for collecting, storing, retrieving, and displaying demographic data on maps? Show Answer A: Geographic Information System (GIS) 2. True or False: Most organizations try to find the one best location. Show Answer A: False 3. What are the three primary regional factors involved in location decision making? Show Answer A: raw materials, markets, and labor considerations 4. Name three trade agreements mentioned in this chapter. Show Answer A: North American Free Trade Agreement (NAFTA), the General Agreement on Tariffs and Trade (GATT), and the U.S. – China Trade Relations Act 5. What are five disadvantages to having global operations? Show Answer A: Transportation costs, security costs, unskilled labor, import restrictions, and criticisms. 6. Suppose that the operating costs of a company has a weight of .20. There are three possible location choices. The first location has a score of 60/100. The second location has a score of 50/100. The third location has a score of 80/100. What are the weighted scores of each location possibility? Show Answer A: 7. What are some benefits associated with a company moving it’s operation’s globally? Show Answer A: Market expansion, financial savings, legal, etc. 8. What is the center of gravity method used for? Show Answer A: Locating a distribution center that minimizes distribution costs. 9. Find the center of gravity with the information provided below. DestinationxyL185L262L343L435Show Answer A: 10. Determine the center of gravity based on the following information: DestinationxyWeekly QuantityL176700L253500L386800L464600L522200Total28212,800Show Answer A: 11. Use the table below and the cost-profit-volume analysis to determine the B Superior range approximation. LocationFixed Costs per YearVariable Costs per Unit1$250,000$202$150,000$503$350,000$254$225,000$40Show Answer A: 12. Use the table from Question 12 and the cost-profit-volume analysis to find the C Superior range approximation. Show Answer A: Use the following information to answer question 1-3. 1. What is their total costs for the month? a. $2300 Show Answer Answer: c. page 376 2. What is the firm’s total revenue for the month? a. $20000 Show Answer Answer: a. page 378 3. What is the firm’s profit for the month ? a. $20000 Show Answer Answer: d. page 378 4. If two alternatives yield comparable annual costs, management would be indifferent in choosing between the two in terms of _. a. total revenue Show Answer Answer b. page 378 5. The transportation cost must be converted into cost per unit of in order to correspond to other variable costs if raw materials are involved. a. input Show Answer Answer: b. page 378 6. Which of the following is NOT a governmental factor when locating in a foreign region? Show Answer Answer: E, pg. 378 Unit 7 Discussion#1 Choose a business that you would be interested in opening in your community. How would you decide where to locate that business? What would you be most concerned about in making this choice? Which method for evaluating location alternatives which minimizes shipping costs between multiple sending and receiving locations is?transportation model analysis**Transportation model analysis minimizes shipping costs between multiple sending and receiving locations.
What are the common techniques used to evaluate location alternatives?Four major methods are used for solving location problems: the factor-rating method, locational cost–volume analysis, the center-of-gravity method, and the transportation model.
Which method listed below is used to determine a location alternative that minimizes distribution costs?reject both locations. The method for determining location alternatives which minimizes distribution costs is: A. break-even analysis.
What location evaluation method bases a decision based on minimum distribution costs?Using the centre of gravity as starting point, managers can now search in its vicinity for the optimal location. In the center of gravity method of location evaluation, decision is based on minimum distribution costs.
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