40 terms

chapter 8: Location Planning and Analysis

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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
marketing strategy

Firms such as banks, fast-food chains, supermarkets, and retail stores view locations as part of marketing strategy.
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.
B
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.
-costs and customer service
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
centralized vs. decntralized

-A prominent supply chain issue involves whether to have centralized or decentralized distribution.
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
freer trade; technology

-Freer trade and information technology make global operations more feasible
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.
low labor productivity

-Sometimes labor productivity elsewhere is so low that it swamps other advantages.
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
II and III only
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
clustering
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.
manufacturing company
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.
microfactory
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.
identify acceptable locations
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.
-all of the choices
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.
-Evaluate alternative and make a selection

When all alternatives have been evaluated it is time to make a decision.
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.
-factor rating
The center of gravity method is used to _______ travel time, distance, and costs.


A. normalize

B. eliminate

C. average

D. minimize

E. document
minimize

-The center of gravity method minimizes travel time, distance, and costs.
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.
regional factors

-These are regional factors.
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.
Geographic Information System

-GIS stands for Geographical Information System.
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.
.
-globalization

-Globalization involves facilities, personnel, and operations that are located around the world
Some communities offer financial and other incentives to ______ new businesses.


A. tax

B. attract

C. marginalize

D. incorporate

E. zone
-Attract

-Businesses often weigh such incentives in their location decision processes.
Location options do not usually include:


A. expansion.

B. a contract.

C. adding new facilities.

D. moving.

E. doing nothing.
-contract


-A contract has little to do with location options.
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.
-foreign locations

-Foreign locations raise concerns about these issues.
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.
-locational cost-profit volume analysis

-Locational cost-profit-volume analysis is based on total cost curves.
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.
-transportation model analysis

-Transportation model analysis minimizes shipping costs between multiple sending and receiving locations.
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.
-factor rating analysis


-Factor rating analysis evaluates locations by using their composite (weighted-average) scores.
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.
-factor rating

-Factor rating can include both qualitative and quantitative considerations.
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.
reject both locations

-Neither location has the minimum acceptable score.
42. 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:



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
9000

Multiply the variable cost by the volume, then add that product to the fixed cost.
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:



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
17000

Divide the difference in fixed cost by the difference in variable cost. This leads to the point of indifference.
44. 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:



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
.
alpha ave.


-Multiply the variable cost by the volume, then add that product to the fixed cost
45. 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:



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
1500

Compare total costs to arrive at this answer.
46. 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:



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
Divide the difference in fixed cost by the difference in variable cost.
15000
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:



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
Use the total cost formula.
...
48. 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:



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
Use the total cost formula.
...
49. 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:



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
Compare the options based on total cost.
...
50. 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:



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
Compare total costs at this volume.
...
51. A location analysis has been narrowed down to three locations. The critical factors, their weights, and the ratings for each location are shown below:



What is the composite score for location A?


A. 76

B. 75

C. 78

D. 74

E. 76.33
Multiply A's scores by the appropriate weighting factors.
...
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
growth in demand that is leading to greater utilization of existing capacity

-Greater utilization does not necessarily mean that new capacity is needed.
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
access to end consumers


-Firms at the beginning of the supply chain are far removed from final consumers.
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
Multiply the volume by the variable cost, then add to fixed cost.
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
Multiply the volume by the variable cost, then add to fixed cost.
105,500
Multiply the volume by the variable cost, then add to fixed cost.
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