Problems
Problem 1:
In Cambodia, 6 laborers, each making the equivalent of $3 per day, can produce 40 units per day.
In China, 10 laborers, each making the equivalent of $2 per day, can produce 45 units. In
Billings, Montana, 2 laborers, each making $60 per day, can make 100 units. Based on labor cost
only, which location would be most economical to produce the item?
Shipping cost from Cambodia to Denver, Colorado, the final destination, is $1.5 per unit.
Shipping cost from China to Denver is $1 per unit, while the shipping cost from Billings to
Denver is $0.25 per unit. Considering both labor and transportation costs, which is the most
favorable production location?
Problem 2:
Holiday Health, Inc., is opening a new spa. Three locations in the suburbs are being considered.
The following table gives the factors for each site. At which site should Holiday open the new
spa?
Factor Weight Maitland Crestwood Northside Mall
Land space 0.30 60 70 80
Land costs 0.25 40 80 30
Traffic density 0.20 50 80 60
Neighborhood 0.15 50 70 40
income
Zoning laws 0.1 80 20 90
Problem 3:
A company is planning on expanding and building a new plant in one of three Southeast Asian
countries. David Pentico, the manager charged with making the decision, has determined that
five critical success factors can be used to evaluate the prospective countries. Pentico used a
rating system of 1 (least desirable country) to 5 (most desirable) to evaluate each CSF. Which
country should be selected for the new plant?
CSF Weight Taiwan Thailand Singapore
Technology 0.2 4 5 1
Level of 0.1 4 1 5
education
Political and 0.4 1 3 3
legal aspects
Social and 0.1 4 2 3
cultural aspects
Economic factors 0.2 3 3 2
Problem 4:
Peter Billington Stereo, Inc., supplies car radios to auto and manufacturers and is going to open a
new plant. The company is undecided between Detroit and Dallas as the site. The fixed costs in
Dallas are lower due to cheaper land costs, but the variable costs in Dallas are higher because
shipping distance would increase. Given the following costs, perform an analysis of the volume
over which each location is preferable.
Dallas Detroit
Fixed cost $600,000 $800,000
Variable costs $28/radio $22/per radio
Problem 5:
A chain of home health care firms in Louisiana needs to locate a central office from which to
conduct internal audits and other periodic reviews of its facilities. These facilities are scattered
throughout the state, as detailed in the following table. Each site, except for Houma, will be
visited 3 times each year by a team of workers, who will drive from central office to the site.
Houma will be visited 5 times a year. Which coordinates represent a good central location for
this office? What other factors might influence the office location decision? Where would you
place this office? Explain
City X Y
Covington 9.2 3.5
Donaldsonville 7.3 2.5
Houma 7.8 1.4
Monroe 5 8.4
Natchitoches 2.8 6.5
New Iberia 5.5 2.4
Opelousas 5 3.6
Ruston 3.8 8.5
Problem 6:
Minfly Golf Company manufactures golf balls at three locations: Philadelphia, Chicago, and
Denver. Cases of golf balls are shipped to warehouses in Orlando, Dallas, and Los Angeles. The
table below provides the weekly capacities of the factories and the minimum weekly
requirements for the warehouses along with the cost per case to ship between them. What
shipping plan will minimize total costs?
Factories Orlando Dallas Los Angeles Capacities
Philadelphia 6 9 16 2500
Chicago 7 5 10 1500
Denver 13 8 5 2000
Requirements 3000 1200 1800