Chapter 08 Location Planning and Analysi PDF

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Chapter 08 - Location Planning and Analysis

Chapter 08 Location Planning and Analysis True / False Questions

1. Location decisions are basically one-time decisions usually made by new organizations. True False

2. The fact that most types of firms are located in every section of the country suggests that in many cases, location decisions are not overly important; one location typically is as good as another. True False

3. You can't make a mistake by locating where labor costs are low. True False

4. Advanced communications has aided globalization. True False

5. The first step in developing location alternatives is identifying important factors. True False

6. An example of a regional factor in location planning is the location of our markets (either existing or potential). True False

7. A strategy that emphasizes convenience for the customers would probably select a single very large facility. True False

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Chapter 08 - Location Planning and Analysis

8. For service organizations, the dominant factors in location analysis usually are marketrelated. True False

9. Global Positioning Systems (GPS) use the Center of Gravity method to establish starting grid co-ordinates. True False

10. Labor laws are an important site-related factor. True False

11. Web-based, retail businesses should be located near the customer to reduce their long distance phone charges. True False

12. For service and retail stores, a prime factor in location analysis is customer access. True False

13. Retail businesses generally prefer locations that are not near other retailers, as this reduces their competition. True False

14. Technology has made communication with global operations as easy as local communication. True False

15. Factor rating is limited to quantitative information concerning location decisions. True False

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Chapter 08 - Location Planning and Analysis

16. As a result of the factor rating analysis, a manager may sometimes reject all of the alternatives under consideration when the composite scores are below the minimum threshold value. True False

17. The lower cost of foreign labor is often offset by lower levels of productivity. True False

18. The center of gravity method is a location planning technique that determines a composite score from weighted factor evaluation. True False

19. The center of gravity method is useful in location planning for the location of a distribution center. True False

20. The center of gravity method of location planning is accurate only when the quantities to be shipped to each location are equal. True False

21. Location decisions are closely tied to an organization's strategies. True False

22. A "micro-factory" is a small, automated facility with a narrow product focus located near major markets. True False

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Chapter 08 - Location Planning and Analysis

23. One of the reasons for the importance of location decisions is its strategic importance to the supply chains. True False

Multiple Choice Questions

24. Nearness to raw materials would be most important to a  A. grocery store B. tax preparation service C. manufacturing company D. post office E. hospital

25. A one-hour photo processing machine in a Wal-Mart store is an example of a _________. A. micro-factory B. downsize strategy C. diversified strategy D. lean production system E. falling price strategy

26. Which statement best characterizes a typical search for location alternatives? A. identify the best location choice B. minimize cost consequences C. maximize associated profits D. locate near markets E. identify acceptable locations

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Chapter 08 - Location Planning and Analysis

27. Which of the following is not a location option that management can consider in location planning? A. expand an existing facility B. add a new location C. relocate from one location to another D. do nothing E. All are possible options.

28. Which of the following is the last step in the procedure for making location decisions? A. determine the evaluation criteria B. identify important factors C. develop location alternatives D. evaluate alternatives and make a selection E. request input regarding alternatives

29. When a location evaluation includes both quantitative and qualitative inputs, a technique that can be used is ___________. A. Linear programming B. Consumer surveys C. Factor rating D. Transportation models E. Center of gravity methods

30. The center of gravity method is used to _______ travel time, distance and costs. A. Normalize B. Eliminate C. Average D. Minimize E. Document

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Chapter 08 - Location Planning and Analysis

31. In location planning, the location of raw materials, the location of markets, and labor factors are: A. regional factors B. community factors C. site-related factors D. national factors E. minor considerations

32. Software systems known as GIS help in location analysis. The initials GIS stand for _______. A. Graphic Interface Systems B. Global Integrated Software C. Graded Information Systems D. Geo Intensive Software E. Geographical Information System

33. Facilities, personnel and operations that are located around the world are called: A. non-domestic B. diversified operations C. globalization D. worldwide presence E. virtual organization

34. Some communities offer financial and other incentives to ______ new businesses. A. Tax B. Attract C. Marginalize D. Incorporate E. Zone

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Chapter 08 - Location Planning and Analysis

35. Location options don't usually include: A. expansion B. a contract C. adding new facilities D. moving E. doing nothing

36. Cultural differences, Customer preferences, Labor and Resources are factors relating to: A. Regional choices B. Site selection C. Zoning D. Product design E. Foreign locations

37. The method for evaluating location alternatives which uses their total cost curves is: A. cost-volume analysis B. transportation model analysis C. factor rating analysis D. linear regression analysis E. MODI analysis

38. The method for evaluating location alternatives which minimizes shipping costs between multiple sending and receiving locations is: A. cost-volume analysis B. transportation model analysis C. factor rating analysis D. linear regression analysis E. MODI analysis

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Chapter 08 - Location Planning and Analysis

39. The method for evaluating location alternatives which uses their composite (weightedaverage) scores is: A. cost-volume analysis B. transportation model analysis C. factor rating analysis D. linear regression analysis E. MODI analysis

40. An approach to location analysis that can include both qualitative and quantitative considerations is: A. location cost-volume B. factor rating C. transportation model D. expected value (net present value) E. financial analysis

41. A location analysis has been narrowed down to two locations, Akron and Boston. The main factors in the decision will be the supply of raw materials, which has a weight of .50, transportation cost, which has a weight of .40, and labor cost, which has a weight of .10. The scores for raw materials, transportation, and labor are for Akron 60, 80, and 70, respectively; for Boston 70, 50, and 90, respectively. Given this information and a minimum acceptable composite score of 75, we can say that the manager should: A. be indifferent between these locations B. choose Akron C. choose Boston D. reject both locations E. build a plant in both cities

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Chapter 08 - Location Planning and Analysis Essay Questions

42. A manager must decide between two location alternatives, Boston and Chicago. Boston would have annual fixed costs of $70,000, transportation costs of $60 per unit, and labor and material costs of $200 per unit. Chicago would have annual fixed costs of $90,000, transportation costs of $40 per unit, and labor and material costs of $170 per unit. Revenue will be $300 per unit. (A) Which alternative would yield the higher profit for an annual demand of 3,000 units? (B) Would the two locations yield the same profit at a certain volume? If so, at what volume would that be?

43. A firm is trying to decide between two location alternatives, Albany and Baltimore. Albany would result in annual fixed costs of $60,000, labor costs of $7 per unit, material costs of $10 per unit, transportation costs of $15 per unit, and revenue per unit of $50. Baltimore would have annual fixed costs of $80,000, labor costs of $6 per unit, material costs of $9 per unit, transportation costs of $14 per unit, and revenue per unit of $48. (A) At an annual volume of 9,000, which would yield the higher profit? (B) At what annual volume would management be indifferent between the two alternatives in terms of annual profits?

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Chapter 08 - Location Planning and Analysis

44. Given the information below on scores of three location alternatives, which alternative would you recommend? Why?

45. Determine the center of gravity location for the destinations and shipping quantities shown below:

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Chapter 08 - Location Planning and Analysis

46. Determine the optimum location for a distribution center to serve the following locations. Shipments to each location will be approximately equal.

Multiple Choice Questions

The Skulls, a student social organization, has two different locations under consideration for constructing a new chapter house. Skull's president, a POM student, estimates that due to differing land costs, utility rates, etc., both fixed and variable costs would be different for each of the proposed sites, as follows:

47. What would be total annual costs for the Alpha Ave. location with twenty persons living there? A. $5,400 B. $4,000 C. $5,000 D. $7,000 E. $9,000

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Chapter 08 - Location Planning and Analysis

48. What would be total annual costs for either location at the point of indifference? A. $13,000 B. $13,350 C. $9,000 D. $17,000 E. $19,200

49. If it is estimated that thirty persons will be living in this new chapter house, which location should the Skulls select? A. Alpha Ave. B. Beta Blvd. C. either Alpha Ave. or Beta Blvd. D. reject both Alpha Ave. nor Beta Blvd. E. become a virtual organization

50. If it is estimated that thirty persons will be living in this new chapter house, what would be the Skull's annual cost savings by selecting the less costly location, rather than the more costly? A. $0 B. $1,500 C. $200 D. $150 E. $350

Essay Questions

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Chapter 08 - Location Planning and Analysis

51. What are total costs for site A for a quantity of 5,000 units per year?

52. What are total costs for site B for a quantity of 5,000 units per year?

53. What are total costs for site C for a quantity of 5,000 units per year?

54. For what quantity would you be indifferent between selecting site A or site B?

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Chapter 08 - Location Planning and Analysis

55. For what quantity would you be indifferent between selecting site B or site C?

56. For what range of output would you prefer site A?

57. For what range of output would you prefer site B?

58. For what range of output would you prefer site C?

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Chapter 08 - Location Planning and Analysis

59. Which site would you prefer for a quantity of 20,000 units per year?

60. For the preferred site for 20,000 units per year, what would be your total costs?

61. For the preferred site for 20,000 units per year, what would be your cost savings compared to each of the other two sites?

Multiple Choice Questions

A manufacturing firm is considering two locations for a plant to produce a new product. The two locations have fixed and variable costs as follows:

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Chapter 08 - Location Planning and Analysis

62. At what annual output would the company be indifferent between the two locations? A. 60,000 units B. 15,000 units C. 10,000 units D. 20,000 units E. 4,000 units

63. What would the total annual costs be for the Phoenix location with an annual output of 10,000 units? A. $280,000 B. $140,000 C. $220,000 D. $300,000 E. $156,000

64. What would be the total annual costs at the point of indifference? A. $300,000 B. $240,000 C. $380,000 D. $220,000 E. $760,000

65. If annual demand is estimated to be 20,000 units, which location should the company select? A. Atlanta B. Phoenix C. either Atlanta or Phoenix D. reject both Atlanta and Phoenix E. build at both locations

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Chapter 08 - Location Planning and Analysis

66. If the annual demand will be 20,000 units, what would be the cost advantage of the better location? A. $20,000 B. $460,000 C. $480,000 D. $80,000 E. $60,000

A location analysis has been narrowed down to three locations. The critical factors, their weights, and the ratings for each location are shown below:

67. What is the composite score for location A? A. 76 B. 75 C. 78 D. 74 E. 76.33

68. What is the composite score for location B? A. 76 B. 75 C. 78 D. 74 E. 76.33

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Chapter 08 - Location Planning and Analysis

69. What is the composite score for location C? A. 76 B. 75 C. 78 D. 74 E. 76.33

70. If the selection criteria is to be the greatest composite score, management should choose: A. location A B. location B C. location C D. either B or C E. to reject all locations

71. If the decisions rule is to select the location with the greatest composite score exceeding 80, management should choose: A. location A B. location B C. location C D. either B or C E. to reject all locations

A clothing manufacturer produces clothing in five locations in the U. S. In a move to vertical integration, the company is planning a new fabric production plant that will supply fabric to all five clothing plants. The clothing plants have been located on a coordinate system as follows:

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Chapter 08 - Location Planning and Analysis

72. If the amount of fabric shipped to each plant is equal, what is the optimal location for the fabric plant? A. 5, 5 B. 6, 4 C. 4, 6 D. 6, 2 E. 5, 4

73. Shipments of fabric to each plant vary per week as follows: plant A, 200 units; plant B, 400 units; plant C, 300 units; plant D, 300 units; and plant E, 200 units. What is the optimal location for the fabric plant? A. 6.2, 3.0 B. 6.0, 4.0 C. 6.5, 5.3 D. 5.6, 4.4 E. 5.0, 3.0

A hardware distributor has regional warehouses at the locations shown below. The company wants to locate a new central distribution center to serve this warehouse network.

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Chapter 08 - Location Planning and Analysis

74. If weekly shipments to each warehouse will be approximately equal, what is the optimal location for the distribution center? A. 5, 5 B. 5, 4 C. 4, 5 D. 5, 6 E. 6, 5

75. Weekly shipments to each warehouse will be: WH1, 100; WH2, 150; WH3, 120; WH4, 150; and WH5, 120. What is the optimal location of the distribution center? A. 5.1, 4.2 B. 5.2, 4.0 C. 5.1, 5.1 D. 4.2, 5.1 E. 4.9, 5.2

76. Which of the following circumstances would be least likely to lead to a need for a new location? A. Shifting of markets. B. Depletion of basic inputs. C. Growth in demand that is leading to greater utilization of existing capacity. D. The need to expand into new markets. E. The opportunity to take advantage of globalization trends.

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Chapter 08 - Location Planning and Analysis

77. Which of the following is least important as a consideration for a firm at the beginning of a supply chain? A. Access to end consumers B. Access to resources C. Proximity to customers D. Access to transportation infrastructure E. Access to productive labor

78. Location choice I has monthly fixed costs of $100,000 and per-unit variable costs of $10. What would its total cost be at a monthly volume of 250 units? A. $105,200 B. $102,500 C. $100,250 D. $100,520 E. $105,500

79. Location choice I has monthly fixed costs of $100,000 and per-unit variable costs of $10. What would its total cost be at a monthly volume of 550 units? A. $105,200 B. $102,500 C. $100,250 D. $100,520 E. $105,500

80. Location choice I has monthly fixed costs of $100,000 and per-unit variable costs of $10. Location choice J has monthly fixed costs of $150,000 and per-unit variable costs of $9. At what volume would these locations have equal total costs? A. 30,000 units B. 25,000 units C. 40,000 units D. 50,000 units E. 60,000 units

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Chapter 08 - Location Planning and Analysis

Chapter 08 Location Planning and Analysis Answer Key

True / False Questions

1. Location decisions are basically one-time decisions usually made by new organizations. FALSE Most organizations face location decisions over time.

AACSB: Reflective Thinking Bloom's: Remember Difficulty: Medium Learning Objective: 08-01 Identify some of the main reasons organizations need to make location decisions. Topic Area: The Nature of Location Decisions

2. The fact that most types of firms are located in every section of the country suggests that in many cases, location decisions are not overly important; one location typically is as good as another. FALSE Many factors make locations relatively more or less attractive.

AACSB: Reflective Thinking Bloom's: Remember Difficulty: Medium Learning Objective: 08-02 Explain why location decisions are important. Topic Area: The Nature of Location Decisions

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Chapter 08 - Location Planning and Analysis

3. You can't make a mistake by locating where labor costs are low. FALSE Labor costs are only occasionally a primary consideration in location decisions.

AACSB: Reflective Thinking Bloom's: Understand Difficulty: Medium Learning Objective: 08-04 Give examples of the major factors that affect location decisions. Topic Area: Identifying a Country, Region, Community and Site

4. Advanced communications has aided globalization. TRUE Globalization has been helped along by advances in communication technology.

AACSB: Reflective Thinking Bloom's: Remember Difficulty: Easy Learning Objective: 08-04 Give examples of the major factors that affect location decisions. Topic Area: Global Locations

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Chapter 08 - Location Planning and Analysis

5. The first step in developing location alternatives is identifying important factors. FALSE The first step is deciding on the criteria for evaluating the alternatives.

AACSB: Reflective Thinking Bloom's: Remember Difficulty: Hard Learning Objective: 08-05 Outline the decision process for making these kinds of decisions. Topic Area: General Procedures for Making Location Decisions

6. An example of a regional factor in location planning is the location of our markets (either existing or potential). TRUE Market location is a regional factor.

AACSB: Reflective Thinking Bloom's: Remember Difficulty: Easy Learning Objective: 08-04 Give examples of the major factors that affect location decisions. Topic Area: Identifying a Country, Region, Com...