Deck 8: Location Planning and Analysis

Question 1

Global positioning systems (GPS) use the center of gravity method to establish starting grid coordinates.

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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.

Answer 3

False

Question 4

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

Question 5

In regards to supply chain management and the location decision, a primary challenge is to address _______________ distribution.

A) insourced vs. outsourced
B) strategic vs. tactical
C) local vs. global
D) centralized vs. decentralized
E) anticipatory vs. reactive

Question 6

Advanced communications has aided globalization.

Question 7

You cannot make a mistake by locating where labor costs are low.

Question 8

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

Question 9

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

Question 10

Factor rating is limited to quantitative information concerning location decisions.

Question 11

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

Question 12

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

Question 13

For service firms such as banks and supermarkets, location decisions are critical elements of __________ strategy.

A) marketing
B) pricing
C) promotional
D) efficiency
E) effectiveness

Question 14

In general, managing global operations is made easier by __________ and __________.

A) political uncertainty; currency devaluation
B) differentiation strategies; diversified markets
C) low interest rates; price-sensitive customers
D) cost-leadership strategies; labor productivity
E) freer trade; technology

Question 15

When service firms such as retailers or banks make growth-spurred location decisions, typically these involve:

A) finding new sources of resources to replace exhausted ones.
B) adding new locations rather than expanding existing ones.
C) closing down existing locations and opening new ones elsewhere.
D) expanding existing locations rather than adding new ones.
E) downsizing existing locations and opening new ones elsewhere.

Question 16

Labor laws are an important site-related factor.

Question 17

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

Question 18

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

Question 19

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

Question 20

When making location decisions, nonprofit organizations differ from for-profit ones in seeking a balance between:

A) profits and opportunities.
B) costs and revenues.
C) costs and customer service.
D) growth and stability.
E) stability and opportunity.

Question 21

The method for evaluating location alternatives that minimizes shipping costs between multiple sending and receiving locations is:

A) locational cost-profit-volume analysis.
B) transportation model analysis.
C) factor rating analysis.
D) linear regression analysis.
E) MODI analysis.

Question 22

The method for evaluating location alternatives that uses their total cost curves is:

A) locational cost-profit-volume analysis.
B) transportation model analysis.
C) factor rating analysis.
D) linear regression analysis.
E) MODI analysis.

Question 23

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 of the choices.

Question 24

Retail businesses often engage in ____________, the tendency to locate in close proximity to one another.

A) centering
B) strategizing
C) clustering
D) localcasting
E) macromarketing

Question 25

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.

Question 26

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.

Question 27

Location options do not usually include:

A) expansion.
B) a contract.
C) adding new facilities.
D) moving.
E) doing nothing.

Question 28

An approach to location analysis that can include both qualitative and quantitative considerations is:

A) locational cost-profit-volume.
B) factor rating.
C) transportation model.
D) expected value (net present value).
E) financial analysis.

Question 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.

Question 30

Having facilities, personnel, and operations located around the world is called:

A) nondomestic operations.
B) diversified operations.
C) globalization.
D) worldwide presence.
E) virtual organization.

Question 31

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

A) normalize
B) eliminate
C) average
D) minimize
E) document

Question 32

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.

Question 33

Among the disadvantages of having global operations is/are:

A) low labor productivity.
B) less restrictive environmental regulation.
C) lower wage costs.
D) proximity to global markets.
E) favorable liability laws.

Question 34

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) Geographic Information System.

Question 35

A one-hour photo processing machine in a Walmart store is an example of a:

A) microfactory.
B) downsize strategy.
C) diversified strategy.
D) lean production system.
E) falling price strategy.

Question 36

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.

Question 37

Locational cost-profit-volume analysis assumes:
(I) nonlinear variable costs.
(II) fixed costs that are constant over the range of possible output.
(III accurate estimates regarding the required level of output.
(IV) multiple products.

A) I, III, and IV only
B) II and III only
C) I, II, and III only
D) II, III, and IV only
E) I, II, III, and IV

Question 38

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.

Question 39

The method for evaluating location alternatives that uses their composite (weighted-average) scores is:

A) cost-profit-volume analysis.
B) transportation model analysis.
C) factor rating analysis.
D) linear regression analysis.
E) MODI analysis.

Question 40

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

A) tax
B) attract
C) marginalize
D) incorporate
E) zone

Question 41

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: $$\begin{array} { l r l } \text { Location } & \mathrm { FC } \text { (annual) } & \mathrm { VC } \text { (per unit) } \\\hline \text { Atlanta } & \$ 80,000 & \$ 20 \\\text { Phoenix } & \$ 140,000 & \$ 16\end{array}$$ 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

Question 42

A location analysis has been narrowed down to three locations. The critical factors, their weights, and the ratings for each location are shown below: $$\begin{array} {c} \quad\quad\quad\quad\quad\quad\quad\quad{ \text { Location } } \\\begin{array} { l c c c c } \text { Factor } &\text { Wt. } & \text { A } & \text { B } & \text { C } \\\hline \text { Labor Cost } & .4 & 70 & 80 & 90 \\\text { Transportation Cost } & .2 & 80 & 80 & 60 \\\text { Market Access } & .2 & 90 & 70 & 60 \\\text { Raw Materials Cost } & .1 & 50 & 70 & 90 \\\text { Utility Cost } & .1 & 80 & 90 & 70\end{array}\end{array}$$ What is the composite score for location C?

A) 76
B) 75
C) 78
D) 74
E) 76.33

Question 43

The Skulls, a student social organization, has two different locations under consideration for constructing a new chapter house. The Skulls' 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: $\begin{array}{lcl}\text { Location } & \begin{array}{r}\text { Annual } \\\text { Fixed }\end{array} & \text { Variable } \\\hline \text { Alpha Ave. } & \$ 5,000 & \$ 200 \text { per person } \\\text { Beta Blvd. } & \$ 8,000 & \$ 150 \text { per person }\end{array}$ If it is estimated that 30 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. and Beta Blvd.
E) become a virtual organization

Question 44

A location analysis has been narrowed down to three locations. The critical factors, their weights, and the ratings for each location are shown below: $$\begin{array} {c} \quad\quad\quad\quad\quad\quad\quad\quad{ \text { Location } } \\\begin{array} { l c c c c } \text { Factor } &\text { Wt. } & \text { A } & \text { B } & \text { C } \\\hline \text { Labor Cost } & .4 & 70 & 80 & 90 \\\text { Transportation Cost } & .2 & 80 & 80 & 60 \\\text { Market Access } & .2 & 90 & 70 & 60 \\\text { Raw Materials Cost } & .1 & 50 & 70 & 90 \\\text { Utility Cost } & .1 & 80 & 90 & 70\end{array}\end{array}$$ What is the composite score for location A?

A) 76
B) 75
C) 78
D) 74
E) 76.33

Question 45

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: $$\begin{array} { l r l } \text { Location } & \mathrm { FC } \text { (annual) } & \mathrm { VC } \text { (per unit) } \\\hline \text { Atlanta } & \$ 80,000 & \$ 20 \\\text { Phoenix } & \$ 140,000 & \$ 16\end{array}$$ 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

Question 46

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

Question 47

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: $$\begin{array} { l r l } \text { Location } & \mathrm { FC } \text { (annual) } & \mathrm { VC } \text { (per unit) } \\\hline \text { Atlanta } & \$ 80,000 & \$ 20 \\\text { Phoenix } & \$ 140,000 & \$ 16\end{array}$$ 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

Question 48

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. $$\begin{array} { l l } \text { Location } & ( \mathrm { x } , \mathrm { y } ) \\\hline 1 & 2,3 \\2 & 3,7 \\3 & 5,5 \\4 & 7,3 \\5 & 8,7\end{array}$$ 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

Question 49

The Skulls, a student social organization, has two different locations under consideration for constructing a new chapter house. The Skulls' 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: $\begin{array}{lcl}\text { Location } & \begin{array}{r}\text { Annual } \\\text { Fixed }\end{array} & \text { Variable } \\\hline \text { Alpha Ave. } & \$ 5,000 & \$ 200 \text { per person } \\\text { Beta Blvd. } & \$ 8,000 & \$ 150 \text { per person }\end{array}$ 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

Question 50

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.

Question 51

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: $$\begin{array} { l r l } \text { Location } & \mathrm { FC } \text { (annual) } & \mathrm { VC } \text { (per unit) } \\\hline \text { Atlanta } & \$ 80,000 & \$ 20 \\\text { Phoenix } & \$ 140,000 & \$ 16\end{array}$$ 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

Question 52

The Skulls, a student social organization, has two different locations under consideration for constructing a new chapter house. The Skulls' 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: $\begin{array}{lcl}\text { Location } & \begin{array}{r}\text { Annual } \\\text { Fixed }\end{array} & \text { Variable } \\\hline \text { Alpha Ave. } & \$ 5,000 & \$ 200 \text { per person } \\\text { Beta Blvd. } & \$ 8,000 & \$ 150 \text { per person }\end{array}$ What would be the total annual costs for the Alpha Ave. location with 20 persons living there?

A) $5,400
B) $4,000
C) $5,000
D) $7,000
E) $9,000

Question 53

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: $$\begin{array} { l r l } \text { Location } & \mathrm { FC } \text { (annual) } & \mathrm { VC } \text { (per unit) } \\\hline \text { Atlanta } & \$ 80,000 & \$ 20 \\\text { Phoenix } & \$ 140,000 & \$ 16\end{array}$$ 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

Question 54

A location analysis has been narrowed down to three locations. The critical factors, their weights, and the ratings for each location are shown below: $$\begin{array} {c} \quad\quad\quad\quad\quad\quad\quad\quad{ \text { Location } } \\\begin{array} { l c c c c } \text { Factor } &\text { Wt. } & \text { A } & \text { B } & \text { C } \\\hline \text { Labor Cost } & .4 & 70 & 80 & 90 \\\text { Transportation Cost } & .2 & 80 & 80 & 60 \\\text { Market Access } & .2 & 90 & 70 & 60 \\\text { Raw Materials Cost } & .1 & 50 & 70 & 90 \\\text { Utility Cost } & .1 & 80 & 90 & 70\end{array}\end{array}$$ What is the composite score for location B?

A) 76
B) 75
C) 78
D) 74
E) 76.33

Question 55

A location analysis has been narrowed down to three locations. The critical factors, their weights, and the ratings for each location are shown below: $$\begin{array} {c} \quad\quad\quad\quad\quad\quad\quad\quad{ \text { Location } } \\\begin{array} { l c c c c } \text { Factor } &\text { Wt. } & \text { A } & \text { B } & \text { C } \\\hline \text { Labor Cost } & .4 & 70 & 80 & 90 \\\text { Transportation Cost } & .2 & 80 & 80 & 60 \\\text { Market Access } & .2 & 90 & 70 & 60 \\\text { Raw Materials Cost } & .1 & 50 & 70 & 90 \\\text { Utility Cost } & .1 & 80 & 90 & 70\end{array}\end{array}$$ If the decision 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 location B or location C.
E) to reject all locations.

Question 56

A location analysis has been narrowed down to three locations. The critical factors, their weights, and the ratings for each location are shown below: $$\begin{array} {c} \quad\quad\quad\quad\quad\quad\quad\quad{ \text { Location } } \\\begin{array} { l c c c c } \text { Factor } &\text { Wt. } & \text { A } & \text { B } & \text { C } \\\hline \text { Labor Cost } & .4 & 70 & 80 & 90 \\\text { Transportation Cost } & .2 & 80 & 80 & 60 \\\text { Market Access } & .2 & 90 & 70 & 60 \\\text { Raw Materials Cost } & .1 & 50 & 70 & 90 \\\text { Utility Cost } & .1 & 80 & 90 & 70\end{array}\end{array}$$ If the selection criterion is to be the greatest composite score, management should choose:

A) location A.
B) location B.
C) location C.
D) either location B or location C.
E) to reject all locations.

Question 57

A clothing manufacturer produces clothing in five locations in the United States. 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: $$\begin{array} { l l } \text { Location } & ( \mathrm { x } , \mathrm { y } ) \\\hline \mathrm { A } & 7,2 \\\mathrm {~B} & 4,7 \\\mathrm { C } & 5,5 \\\mathrm { D } & 6,2 \\\mathrm { E } & 8,4\end{array}$$ 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

Question 58

The Skulls, a student social organization, has two different locations under consideration for constructing a new chapter house. The Skulls' 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: $\begin{array}{lcl}\text { Location } & \begin{array}{r}\text { Annual } \\\text { Fixed }\end{array} & \text { Variable } \\\hline \text { Alpha Ave. } & \$ 5,000 & \$ 200 \text { per person } \\\text { Beta Blvd. } & \$ 8,000 & \$ 150 \text { per person }\end{array}$ If it is estimated that 30 persons will be living in this new chapter house, what would be the Skulls' 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

Question 59

A clothing manufacturer produces clothing in five locations in the United States. 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: $$\begin{array} { l l } \text { Location } & ( \mathrm { x } , \mathrm { y } ) \\\hline \mathrm { A } & 7,2 \\\mathrm { B} & 4,7 \\\mathrm { C } & 5,5 \\\mathrm { D } & 6,2 \\\mathrm { E } & 8,4\end{array}$$ 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

Question 60

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. $$\begin{array} { l l } \text { Location } & ( \mathrm { x } , \mathrm { y } ) \\\hline 1 & 2,3 \\2 & 3,7 \\3 & 5,5 \\4 & 7,3 \\5 & 8,7\end{array}$$ 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

Question 61

Consider the following information about sites A, B, and C: For what range of output would you prefer site B?

Question 62

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

Question 63

Consider the following information about sites A, B, and C: For what quantity would you be indifferent between selecting site A or site B?

Question 64

Consider the following information about sites A, B, and C: What are total costs for site A for a quantity of 5,000 units per year?

Question 65

Consider the following information about sites A, B, and C: For what range of output would you prefer site C?

Question 66

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

Question 67

Consider the following information about sites A, B, and C: For the preferred site for 20,000 units per year, what would be your total costs?

Question 68

Consider the following information about sites A, B, and C: What are total costs for site B for a quantity of 5,000 units per year?

Question 69

Consider the following information about sites A, B, and C: Which site would you prefer for a quantity of 20,000 units per year?

Question 70

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?

Question 71

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

Question 72

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

Question 73

Consider the following information about sites A, B, and C: For the preferred site for 20,000 units per year, what would be your cost savings compared to each of the other two sites?

Question 74

Determine the center of gravity location for the following destinations and shipping quantities:

Question 75

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

Question 76

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?

Question 77

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

Question 78

Consider the following information about sites A, B, and C: What are total costs for site C for a quantity of 5,000 units per year?

Question 79

Consider the following information about sites A, B, and C: For what quantity would you be indifferent between selecting site B or site C?

Question 80

Consider the following information about sites A, B, and C: For what range of output would you prefer site A?