1.

Three different manufacturing systems are being considered in order to produce

product A. The summary of the cost involved at each system is listed below:

Process information Manufacturing Manufacturing Manufacturing

System A System B System C
Machine Cost (RM) 15,000 40,000 55,000
Building renovation 5,000 20,000 25,000
cost (RM)
Material Cost 100 70 30
(RM/unit)
Labour Cost 75 100 100
(RM/hour)
Production Rate 5 10 10
(unit/hour)

Using calculation and graphical method, determine the ranges for production process
that produces economic production cost.

2. A multinational company is considering building a new factory at one of the short

listed potential locations. The data related to the three alternative locations is
shown in Table 1.

(i) In a single graph, draw cost lines representing the three alternative
locations.
(ii) Determine the economical range for the location selection.
(iii) If the expected demand is 250,000 for the first year with annual
increment of 50,000 per year for the next ten years, recommend the
best location for the new factory. Explain your answer.
15 marks)

Table 1 : Data for alternative locations

Location A Location B Location C

Annual rental ($) 80,000 150,000 420,000
Annual maintenance cost 20,000 50,000 80,000
($)
Material cost 10 11 9
($/unit product)
Labour cost 5 3 4
($/unit product)
Labour required (person) 30 25 20
3. The manager at PT Karjo Bhd has gathered some information for manufacturing
decision at four different potential locations. The information is shown in Table 1.

(i) Draw a graph representing total cost lines for the four alternatives.
(ii) Determine the economical range for location selection.
(iii) If the product demand for first year is 61,000 units, with an increment of
1,000 units for the second year and a decrease of 2,000 units each year for the
following 10 years, recommend the best location for the factory. Explain your
answer.
(15 marks)
Table 1 : Gathered Information for Manufacturing Decision

Location Location Location Location

A B C D
Total number of workers 34 36 30 26
Building and machinery rental ($) 180,000 90,000 270,000 350,000
Material cost ($/unit product) 5 6 4 2
Licenses fees ($) 20,000 10,000 30,000 50,000
Annual average worker salary 15,000 17,000 18,000 19,000
($/worker)
Unit labour cost ($/unit product) 5 2 2 1

4. At the head quarters of a multi-national company, there are six (6) major
departments (P, Q, R, S, T and U) that regularly need printing services. The
location coordinates, number of clerical staffs and the expected daily frequency of
printing done by each staff are illustrated in Table 2.
(i) Using Minisum method, recommend the optimum location for a printing
station.
(ii) Calculate the weekly optimum printing traveling cost, if the company is
operating for 5 days a week. The unit traveling cost is $0.75.
( 15 Markah )
Table 2 : Data for Q2
Departments Coordinates Clerical staffs Travel frequency by
each staff
P (1,2) 2 2
Q (8,9) 3 4
R (6,7) 5 6
S (3,8) 2 3
T (5,1) 2 5
U (9,2) 6 3
5. The corporate planner at Samijan Bhd has gathered some information for
manufacturing decision at three different potential locations. The information is
shown in Table 1.

(ii) Draw a graph representing total cost lines for the four alternatives.
(ii) Determine the economical range for location selection.
(iii) If the product demand for first year is 101,000 units, with an increment of
1,000 units for the second year and a decrease of 2,000 units each year for the
following 10 years, recommend the best location for the factory. Explain your
answer.
(15 marks)
Table 1 : Gathered Information for Manufacturing Decision

Location Location B Location

A C
Total number of workers 120 100 90
Building rental ($) 80,000 50,000 150,000
Machinery rental ($) 75,000 35,000 90,000
Maintenance ($) 20,000 10,000 20,000
Material cost ($/unit product) 4 5 3
Licenses fees ($) 25,000 5,000 40,000
Annual average worker salary ($/worker) 20,000 23,000 25,000
Unit labour cost ($/unit product) 6 3 3

6. At a multi-national manufacturing company, there are eight (8) major departments

(A,B,C,D,E,F,G and H) that regularly need tools grinding services. The
departments location coordinates, number of tool handling staffs and the expected
daily frequency of travelling by each tool handling staff are illustrated in Table 2.
i. Using Minisum method, recommend the alternative optimum location for
a tools grinding station.
ii. Calculate the monthly optimum grinding traveling cost from Minisum
method, if the company is operating for 24 days a month. The unit
traveling cost is $2.20.
{(6,4,), 23865.6} ( 15 marks )
Table 2 : Data for Q2
Departments Coordinates Tool handling staffs Travel frequency by
each staff
A (9,1) 2 4
B (9,4) 2 5
C (1,2) 2 2
D (8,9) 3 4
E (6,7) 5 6
F (3,8) 2 3
G (5,1) 2 5
H (9,2) 6 3
7. An assembly company has six work stations with the location coordinates of
(8,8), (1,7), (2,3), (5,6), (7,1) and (1,4). Due to a new product development, one
new machine has to be added into the factory area. The estimated travel
frequencies per hour from the new machine to the existing machines are 3, 5, 7, 4,
2 and 8 respectively.

a. Using Minisum method, propose optimum location for the new machine.
b. If the unit travel cost is $0.50, calculate the total travel cost for 8 hour shift
work.

{(2,4), 404} (10 marks)

9. In an aeronautic component manufacturing factory there are six (6) main

machines located at the following coordinates: M1(30,20), M2(20,40),
M3(50,60), M4(30,70), M5(50,40) dan M6(80,80). It is known that the
maintenance frequency of machines M1 and M6 is 7 times per month for each
machine. Maintenance requirement for other machines are only 3 times per
month for each machine. The management has decided to have a central
maintenance department to execute the maintenance activities of the whole
factory. Using minisum method, recommend the optimum location for the
maintenace department.
(12 marks)

11. Pelican Company has four (4) distribution centres (P, Q, R and S) which requires
monthly petrol supply of 40,000, 60,000, 30,000 and 50,000 litres respectively.
Three suppliers (P1, P2 and P3) have agreed to supply the petrol in quantity of
50,000, 70,000 and 60,000 litres respectively in order to meet the demand. Cost to
supply the petrol (inclusive delivery and cost of petrol) from each supplier is
shown in Table 8.

i. Using transportation method, determine the optimum solution. Show

that each demand is fulfilled and each supply capacity has been
utilised.
ii. Calculate the total optimum cost.
{269000, 270000} ( 15 Marks )
 Table 8 : Cost to supply petrol to Distribution Centres (RM/Liter)

Distribution Centres
Supplier A B C D
1 RM 1.30 RM 1.40 RM 1.80 RM 1.60 50000
(40000) (10) 10 (0)
2 RM 1.30 RM 1.50 RM 1.80 RM 1.60 70000
30 (40) 30
3 RM 1.60 RM 1.40 RM 1.70 RM 1.50 60000
(50) (10) 10 (0)
40000(0) 60000 (0) 30000 50000
0 (40) 0

12. Manufacturing facilities layout is mainly consists of product layout,

process layout and fixed position layout. Draw simple diagram
representing the fixed position layout type and explain how it functions.
Provide example in your answer.
(5 marks)

14. Table 7 shows the demand data from sales agents P1 – P5, existing factory
capacity (factory A and B) and unit cost (manufacturing cost + delivery cost) for
ABC Company at its two factory locations. The existing total capacity at both
location A and B cannot fulfil the total demand. The corporate planning
department has suggested two suitable locations to build new factory in order to
fulfil the shortage capacity. The data relating to the new factory location is shown
in Table 8. The management is considering building only one new factory. Using
transportation method, determine the best solution. Assume the cost to build the
new factory at both locations are the same.
(13 marks)

Table 7 : Data for demand, capacity and total unit cost from existing factories

Total Manufacturing Cost + Delivery Cost From Factory

To Sales Agent
($/unit product)
Existing Factory P1 P2 P3 P4 P5
Factory Capacity
A 250,000 25 28 30 32 35
B 180,000 33 31 27 26 23
Sales Agent Demand 80,000 150,000 100,000 120,000 130,000
 Table 8 : Capacity Data and Total Unit Cost for new factory location

Total Manufacturing Cost + Delivery Cost From Factory

To Sales Agent
($/unit product)
Factory Factory P1 P2 P3 P4 P5
Location Capacity
C 150,000 24 22 29 34 36
D 150,000 34 36 22 24 29

15. (a) Briefly explain three (3) advantages and three (3) disadvantages of this
layout:

i. Product Layout
(6 marks)

(b) Advance MSL Corp., a producer of machine tools, want to move to a

larger site. Two alternative locations have been identified: Bonham and
McKinney. Bonham would have fixed costs of $800,000 per year and
variable costs of $14,000 per standard unit produced. McKinney would
have annual fixed costs of $920,000 and variable costs of $13,000 per
standard unit. The finished items sell for $29,000 each.

i. At what volume of output would the two locations have the same
profit?
ii. For what range of output would Bonham be superior (have higher
profits)?
iii. For what range would McKinney be superior?
iv. What is the main purpose of determining the break-even points for
these cities?
(14 marks)
16. The regional manager of an international company is seriously considering
building a new factory at one of the five short-listed locations. These short-listed
locations and their relevant information are summarised in Table Q1.

Table Q1
Location A Location B Location C Location D Location E
Rental ($) 200,000 220,000 180,000 150,000 120,000
Maintenance ($) 200,000 220,000 180,000 150,000 150,000
Licence ($) 40,000 20,000 40,000 60,000 70,000
Material 2.50 2.00 0.80 1.50 2.00
($/unit)
Labour ($/unit) 2.80 2.70 0.80 1.50 2.00
Logistics 2.90 2.30 0.40 0.50 2.00
($/unit)

(a) Sketch a graph that represents total cost lines of all locations.

(b) Determine the economic ranges solutions for the above problem.

(c) If majority of the demand is between 20,000 – 25,000 units and only
sometimes reach to 27,000 units, recommend the appropriate location for
the new factory.
(20 marks)