Chapter 08 Location Planning and Analysiss3.amazonaws.com/prealliance_oneclass_sample/XD9X039yrl.pdfChapter 08 - Location Planning and Analysis 8-2 5. The first step in developing

Chapter 08 - Location Planning and Analysis

8-1

Chapter 08

Location Planning and Analysis

True / False Questions

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

FALSE

Difficulty: Medium

TLO: 1

Taxonomy: Knowledge

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

Difficulty: Medium

TLO: 2

Taxonomy: Knowledge

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

FALSE

Difficulty: Medium

TLO: 4 Taxonomy: Knowledge

4. Advanced communications has aided globalization.

TRUE

Difficulty: Easy



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

FALSE

Difficulty: Hard


6. An example of a regional factor in location planning is the location of our markets (either

existing or potential).

TRUE

Difficulty: Easy


7. A strategy that emphasizes convenience for the customers would probably select a single

very large facility.

FALSE

Difficulty: Easy


8. For service organizations, the dominant factors in location analysis usually are market-

related.

TRUE

Difficulty: Medium



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9. Global Positioning Systems (GPS) use the Center of Gravity method to establish starting

grid co-ordinates

FALSE

Difficulty: Easy


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

FALSE

Difficulty: Easy


11. Web-based, retail businesses should be located near the customer to reduce their long

distance phone charges.

FALSE

Difficulty: Easy


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

TRUE

Difficulty: Medium


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

their competition.

FALSE

Difficulty: Medium



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

communication.

FALSE

AACSB: RT

Difficulty: Easy TLO: 3

Taxonomy: Knowledge

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

FALSE

Difficulty: Hard TLO: 5

Taxonomy: Knowledge

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

Difficulty: Medium TLO: 5

Taxonomy: Knowledge

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

TRUE

AACSB: MD Difficulty: Easy

TLO: 4

Taxonomy: Knowledge


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18. The center of gravity method is a location planning technique that determines a composite

score from weighted factor evaluation.

FALSE

Difficulty: Easy


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

distribution center.

TRUE

Difficulty: Easy


20. The center of gravity method of location planning is accurate only when the quantities to

be shipped to each location are equal.

FALSE

Difficulty: Medium


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

TRUE

Difficulty: Easy



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

major markets.

TRUE

Difficulty: Easy


23. One of the reasons for the importance of location decisions is its strategic importance to

the supply chains.

TRUE

AACSB: RT

Difficulty: Easy TLO: 2

Taxonomy: Knowledge

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

Difficulty: Easy



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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

Difficulty: Medium


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

Difficulty: Medium


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.

Difficulty: Medium



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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

Difficulty: Easy


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

Difficulty: Medium


30. The center of gravity method is used to _______ travel time, distance and costs.

A. Normalize

B. Eliminate

C. Average

D. Minimize

E. Document

Difficulty: Medium



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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

Difficulty: Medium

TLO: 4

Taxonomy: Knowledge

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

Difficulty: Medium


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

Difficulty: Medium



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34. Some communities offer financial and other incentives to ______ new businesses.

A. Tax

B. Attract

C. Marginalize

D. Incorporate

E. Zone

Difficulty: Easy


35. Location options don't usually include:

A. expansion

B. a contract

C. adding new facilities

D. moving

E. doing nothing

Difficulty: Hard


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

Difficulty: Hard

TLO: 4

Taxonomy: Knowledge


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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

Difficulty: Easy


38. The method for evaluating location alternatives which minimizes shipping costs between

multiple sending and receiving locations is:





E. MODI analysis

Difficulty: Medium


39. The method for evaluating location alternatives which uses their composite (weighted-

average) scores is:





E. MODI analysis

Difficulty: Medium



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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

Difficulty: Medium

TLO: 5

Taxonomy: Knowledge

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

AACSB: AS

Difficulty: Hard TLO: 6

Taxonomy: Application

Essay Questions


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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?

A) At a volume of 3,000 units, Boston's profit would be $50,000 and Chicago's profit would

be $180,000.

B) At an annual volume of 400 units, both locations would have identical losses of $54,000.

AACSB: AS




8-14

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?

A) At an annual volume of 9,000, Albany's profit of $102,000 is higher than Baltimore's profit

of $91,000.

B) Profits for these two locations are identical at an annual volume of 20,000 units.

AACSB: AS



44. Given the information below on scores of three location alternatives, which alternative

would you recommend? Why?

Composite scores are: A = 72, B = 69, and C = 69. If the criterion is highest composite,

choose A.

AACSB: AS




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

shown below:

AACSB: AS Difficulty: Medium

TLO: 6



8-16

46. Determine the optimum location for a distribution center to serve the following locations.

Shipments to each location will be approximately equal.


TLO: 6



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:


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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

AACSB: AS

Difficulty: Medium

TLO: 6


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


TLO: 6


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

AACSB: AS

Difficulty: Medium

TLO: 6 Taxonomy: Application


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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

AACSB: AS



Essay Questions

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

$150,000


TLO: 6



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

$160,000

AACSB: AS



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

$185,000


TLO: 6


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

10,000 units per year

AACSB: AS



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

30,000 units per year


TLO: 6



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

1-9,999

AACSB: AS



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

10,001 - 29,999


TLO: 6


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

30,001 and above

AACSB: AS



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

B


TLO: 6



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

$280,000

AACSB: AS



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?

$20,000 vs. A; $10,000 vs. C


TLO: 6



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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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

AACSB: AS



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


TLO: 6


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

AACSB: AS

Difficulty: Medium



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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

AACSB: AS

Difficulty: Medium

TLO: 6


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


TLO: 6


A location analysis has been narrowed down to three locations. The critical factors, their

weights, and the ratings for each location are shown below:


8-24

67. What is the composite score for location A?

A. 76

B. 75

C. 78

D. 74

E. 76.33

AACSB: AS



68. What is the composite score for location B?

A. 76

B. 75

C. 78

D. 74

E. 76.33


TLO: 6


69. What is the composite score for location C?

A. 76

B. 75

C. 78

D. 74

E. 76.33

AACSB: AS

Difficulty: Medium



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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

AACSB: AS



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


TLO: 6


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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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

AACSB: AS

Difficulty: Medium

TLO: 6


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


TLO: 6


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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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

AACSB: AS

Difficulty: Medium

TLO: 6


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


TLO: 6


Documents

Chapter 08 Location Planning and Analysiss3.amazonaws.com/prealliance_oneclass_sample/XD9X039yrl.pdfChapter 08 - Location Planning and Analysis 8-2 5. The first step in developing