Machine A Machine B Investment 50,000 80,000 Intwerest on Capital invested 15% pa 15% pa hourly charges (Wage+power) Rs 10 Rs 8 Pieces per

hour produced 5 8 Annual operating hours Which machine will have the lower cost per unit of outp 1 whole year? (2000 Hrs) 2 If only 4000 pieces are tobe produced in ayear, which m 3 Will your answer to (i) above vary if you are informed th output of machine B gets rejected at the inspection stag

er unit of output, if run for the

ayear, which machine would have re informed that 12.5% of the nspection stage. If so what could

Selection the location alternatives which has the maximum sum of the pro

Given below are the various factors considered for location decision and the factor ratings assign to each factor based on its importance for location decision and location rating for the location alt basedon the ,merit of each location in each of the factors considered.
Location Rating

Factors
Tax Advantage Suitable Labour Skill Prox. To Cust. Prox. To Supp. Adeq. Of Water Community Accep. Qlty Education System Rail & Air Transportationn Suitable of Climate Power Supp

Factor ratings
4 3 3 5 1 5 4 3 2 2

A
8 2 3 5 1 5 4 3 2 2

B
6 3 6 2 3 4 1 10 7 6

A
32 6 9 25 1 25 16 9 4 4 131

B
24 9 18 10 3 20 4 30 14 12 144

FACTOR RATING M

Which location will you sele

m sum of the product ratings as the choice

factor ratings assigned g for the location alternatives

FACTOR RATING METHOD

ocation will you select?

After evaluating two potential sites A &B by comparing costs and finding them approximately eq from cost point of view, a manufacturer decided to evaluate the intangible factors for these tw by point rating. Comparative ratings assigned to major intangible location factors to determine the relative imp for each factorand the points assigned toeach location alternative for each of the factors are give
Points assigned to locations

Factors
Future Fuel Available Tpt flexibility & Growth Adequacy of Water Supply Labour Availabilty Pollution Regulations Site Topography Living Condition

Max Possible points

300 200 100 250 30 50 150

A
200 150 100 250 30 50 100

B
250 150 100 220 20 40 125

POINT RATING METHOD

Which location will you

880

905

g them approximately equal ible factors for these twolocations

termine the relative importance ch of the factors are given below

POINT RATING METHOD Which location will you select?

Potential locations A B & C have the cost structuresshown for producing aproduct expected to sell at Rs. 100 pe Find the most economical location for an expected volume of 2000 units/year.

Also determine the range of annual volume of production for which each of the location A B & C would be most

Locations
Fixed Cost/year Volume cost/unit

A
25,000 50

B
50,000 25

C
80,000 15

Locations
Fixed Cost/year

A
25,000

B
50,000

C
80,000

xpected to sell at Rs. 100 per unit.

tion A B & C would be most economical?

Locational Break-Even Anlysis Which location will you select?

A manufacturer is evaluating four locations for a new plant and has weighted the relevent scores as given below Scores have been assignedwith higher values indicative of prferred conditions.

Using these scores, develop a qualitative factor comparison for the four locations.

Relevent Factors Assigned Wt.

Production Cost Raw Material supply Labour Availability Cost of living Environment Markets 0.35 0.25 0.2 0.05 0.05 0.1

A
50 70 60 80 50 70

B
40 80 70 70 60 90

C
60 80 60 40 70 80

D
30 60 50 80 90 50

Qualitative factors M

Which location will y

17.5 17.5 12 4 2.5 7 60.5

14 20 14 3.5 3 9 63.5

21 20 12 2 3.5 8 66.5

10.5 15 10 4 4.5 5 49

nt scores as given below

e four locations.

Qualitative factors Method Which location will you select?

A company is to decideon the location of a new plant. It has narrowed down the choices to locations Data in respect of which is furnished below,

Data
Wages & Salaries Power & Water Supply Exp. Raw Material & Supplies Total initial investment Distribution Exp. Misc Exp.
Expected salesper year

A
20,000 20,000 80,000 200,000 50,000 40,000

B
20,000 30,000 75,000 300,000 40,000 25,000

C
20,000 25,000 60,000 250,000 60,000 30,000
0.075

Qualitative factors Met Which location will you

0.2

225,000 210,000

250,000 190,000

225,000 195,000 15000 60000

Total Exp. Profit

2,10,000 1,90,000 1,95,000 15,000 60,000 30,000

wn the choices to locations A,B & C.

Qualitative factors Method Which location will you select?

0.12

30000

Two locations A & B are being examined for location of a new manufacturing plant. Two production processes X & Y are being examined

Process X Process Y Location Fixed Cost Variable Cost Fixed Cost A 15,00,000 Rs 5.9 34,00,000 B 12,50,000 Rs 6.4 30,00,000
In what range of outputs would each location-production combination be preferred?

manufacturing plant.

Process Y Variable Cost Rs 3.8 Rs 4.1

mbination be preferred?

1 Location A would result in fixed costs of Rs 3,00,000 with vari and revenues of Rs 68 per unit.

Annual fixed costs at location B are 8,00,000 with variable co revenue of Rs 68 per unit. Sales volume is estimated to be Rs Which location is most attractive?

A company has to select one location out of the five alternati The annual operating costs and other intangible factors are g Factors Labour Costs Tpt Costs Local Taxes Cost of Power Other Costs Community Attitude Labour Avail Quality of Tpt Quality of Life A B 1,20,000 1,10,000 10,000 8,000 17,000 20,000 21,000 29,000 16,000 11,000 V good good fair Acceptable fair V good Acceptable fair

On the basisof annual operating costs, which site would you c

Devise a method of quantifying the intengible costs and integ cost data into the overall evaluation. Which is the best?

Rs 3,00,000 with variable coss of Rs 63 per unit

000 with variable costs of Rs 32 per unit and s estimated to be Rs 25,000 units/year.

of the five alternatives considered for a new plant angible factors are given below for these five locations. C D 1,60,000 7,000 25,000 25,000 12,000 good fair Outstanding good E 85,000 12,000 19,000 18,000 16,000 75,000 14,000 17,000 23,000 18,000 V good Acceptable fair Outstanding

fair Outstanding Acceptable V good

hich site would you choose?

gible costs and integrate them with the ich is the best?