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MGT 322 Chapter 8. Questions and Answers.

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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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