Chapter 8
Problems
6 - 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 locati
...
Chapter 8
Problems
6 - 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.
Memphis, TN
Building, equipment, administration costs = $40,000
Labor and materials = $8/unit
Increased transportation costs = $50,000
Expected volume = 10,000 units
Economic Analysis = $40,000 + $50,000 + $80,000 (10,000 * $8) = $170,000
Biloxi, MS
Building, equipment, administration costs = $60,000
Labor and materials = $4/unit
Increased transportation costs = $60,000
Expected volume = 10,000 units
Economic Analysis = $60,000 + $60,000 + $40,000 (10,000 * $4) = $160,000
Birmingham, AL
Building, equipment, administration costs = $100,000
Labor and materials = $5/unit
Increased transportation costs = $25,000
Expected volume = 10,000 units
Economic Analysis = $100,000 + $25,000 + $50,000 (10,000 * $5) = $175,000
13 - A clothing manufacturer produces women’s clothes at four locations in Mexico. Relative locations have been determined, as shown in the table below. The location of a central shipping point for bolts of cloth must now be determined. Weekly quantities to be shipped to each location are also shown in the table. Determine the coordinates of the location that will minimize distribution costs.
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