Acct...problem 8 and week4

A firm that has recently experienced an enormous growth rate is seeking to lease a small plant in Memphis, TN; Biloxi, MS; or Birmingham, AL. Prepare an economic analysis of the three locations given the following information: Annual costs for building, equipment, and administration would be $31,400 for Memphis, $60,000 for Biloxi, and $100,000 for Birmingham. Labor and materials are expected to be $8 per unit in Memphis, $4 per unit in Biloxi, and $5 per unit in Birmingham. The Memphis location would increase system transportation costs by $50,000 per year, the Biloxi location by $60,000 per year, and the Birmingham location by $22,200 per year. Expected annual volume is 11,800 units.(Omit the "$" sign in your response.)

      Total Cost

  Memphis

 $  

  Biloxi

$  

  Birmingham

$  

A retired auto mechanic hopes to open a rustproofing shop. Customers would be local new-car dealers. Two locations are being considered, one in the center of the city and one on the outskirts. The central city location would involve fixed monthly costs of $6,840 and labor, materials, and transportation costs of $30 per car. The outside location would have fixed monthly costs of $4,700 and labor, materials, and transportation costs of $40 per car. Dealer price at either location will be $90 per car.

a.

Which location will yield the greatest profit if monthly demand is (1) 200 cars? (2) 300 cars?

  200 cars: yields the greatest profit.

  300 cars: yields the greatest profit.

b.

At what volume of output will the two sites yield the same monthly profit?

  Volume of output

cars  

Location Score

  Factor (100 points each)

Weight

A

B

C

  Convenience

.15       

85

89

75

  Parking facilities

.20       

80

84

96

  Display area

.18       

86

89

90

  Shopper traffic

.27       

93

89

91

  Operating costs

.10       

85

93

94

  Neighborhood

.10       

95

90

83

1.00       

a.

Using the above factor ratings, calculate the composite score for each location. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Location

         Composite Score

A

B

C

b.

Determine which location alternative (A, B, or C) should be chosen on the basis of maximum composite score.

  Factor

Weight

East #1

East #2

West

  Initial cost

8       

160    

110    

160    

  Traffic

8       

30    

50    

45    

  Maintenance

4       

25    

25    

24    

  Dock space

4       

15    

13    

18    

  Neighborhood

2       

8    

14    

13    

a.

Using the above factor ratings, calculate the composite score for each location.

Location

         Composite Score

East #1

East #2

West

b.

Determine which location has the highest composite score:

A manager has received an analysis of several cities being considered for a new office complex. The data (10 points maximum) are as follows:

Location Score

  Factor

A

B

C

  Business services

8

7

7

  Community services

6

6

7

  Real estate cost

3

8

7

  Construction costs

5

6

5

  Cost of living

3

7

8

  Taxes

5

5

4

  Transportation

6

7

8

a.

If the manager weights the factors equally, how would the locations stack up in terms of their composite factor rating scores?

A

/ 7  

B

/ 7  

C

/ 7  

  Thus, is the best.

b.

If business services and construction costs are given weights that are double the weights of the other factors, how would the locations stack up?

A

/ 9  

B

/ 9  

C

/ 9  

  Thus, is best and is least desirable.