Problems

1. One firm must decide among three sites for the construction of a new oil processing
center. The firm has selected the six factors listed below as a basis for evaluation and
assigned rating weights from 1 to 5 on each factor:

Factor Factor Name Rating Weight

1 Proximity to port facility 5
2 Power source availability and cost 3
3 Workforce attitude and cost 4
4 Distance from the city 2
5 Community desirability 2
6 Equipment suppliers in area 3

Management has rated each location for each factor on a 1 to 100 point basis.

Factors Location A Location B Location C

1 100 80 80
2 80 70 100
3 30 60 70
4 10 80 60
5 90 60 80
6 50 60 90

a) Which site will be recommended based on total weighted scores?

b) If location B’s score for Proximity to port facilities was reset at 90, how would the
result change?
c) What score would location B need on Proximity to port facilities to change its
ranking?

2. The fixed and variable costs for three potential manufacturing plant sites are shown:
Site Fixed Cost Variable Cost per Unit
1 50000 1100
2 100000 700
3 170000 400

a) Over what range of production is each optimal?

b) For a production of 200 units, which site is best?
3. One firm supplies car radios to auto manufacturers and is going to open a new plant.
The company is undecided between two sites. The fixed cost in one site is lower due
to cheaper land costs, but the variable cost is higher because shipping distances would
increase. Given the following costs:
Site A Site B
Fixed Costs Rs. 600000 Rs. 800000
Variable Costs Rs. 280/radio Rs. 220/radio

a) Perform and analysis of the volume over which each location preferable.
b) How does your answer change if Site A’s fixed cost increase by 10%

4. The following table gives the map coordinates and the shipping loads for a set of
cities that we wish to connect through the central hub.

City Map Coordinate(x,y) Shipping Load

A (5,10) 5
B (6,8) 10
C (4,9) 15
D (9,5) 5
E (7,9) 15
F (3,2) 10
G (2,6) 5

a) Near which map coordinates should the hub be located

b) If the shipments from city A triple, how does this change the coordinates?