Business Development

Q: Convey the mission of the store by carefully selecting the position of the lead-off department. Key Term: Retail layout 17) Briefly explain what "slotting" is. What ethical issues might arise with regard to slotting? Answer: Slotting is the practice of manufacturers paying for retail shelf space. Many small firms question the legality and ethics of slotting fees, claiming the fees stifle new products, limit their ability to expand, and cost consumers money. Key Term: Slotting fees 18) What is a servicescape? How is it related to the retail layout problem? What are the three elements of servicescape for dealing with these human issues? Answer: Servicescape describes the physical surroundings in which a service takes place, and how they affect customers and employees. Rather than design a retail space strictly for profitability, managers must consider how the surroundingsthe layouthave a humanistic effect on customers and employees. The three elements are ambient conditions; spatial layout and functionality; and signs, symbols, and artifacts. Key Term: Servicescape Section 5 Warehouse and Storage Layouts 1) Cross-docking processes items as they are received, rather than placing them in storage. Answer: TRUE Key Term: Cross-docking 2) Balancing low-cost storage with low-cost material handling is important in which of the following? A) fixed-position layout B) process-oriented layout C) office layout D) repetitive and product-oriented layout E) warehouse layout Answer: E Key Term: Warehouse layout 3) Which of the following reduces product handling, inventory, and facility costs, but requires both (1) tight scheduling and (2) accurate inbound product information? A) phantom-docking B) random stocking C) ASRS D) customizing E) cross-docking Answer: E Key Term: Cross-docking 4) The major problem addressed by the warehouse layout strategy is: A) minimizing difficulties caused by material flow varying with each product. B) requiring frequent close contact between forklift drivers and item pickers. C) addressing trade-offs between space and material handling. D) balancing product flow from one work station to the next. E) locating the docks near a convenient access point to the closest highway. Answer: C Key Term: Warehouse layout 5) The concept of customizing in a warehouse layout: A) is possible, but it causes serious loss of oversight of the quality function. B) cannot be considered seriously in today's high efficiency factories. C) is theoretically sound, but several years away in practice. D) incorporates value-added activities in warehouses. E) locates stock wherever there is an open location. Answer: D Key Term: Customizing 6) ASRS stands for which of the following? A) automated storage and retrieval system B) automated storage and recovery system C) automated scan and recognize system D) automated scan and retail system E) automated scan and retrieval system Answer: A 7) Which of the following is TRUE of random stocking? A) Because items are stocked randomly, accurate inventory records are not necessary. B) Its results always minimize handling costs. C) Products have their own permanent storage spot. D) Each pick can be of only one product. E) None of the above is true. Answer: E Key Term: Random stocking 8) Cross-docking means which of the following? A) Avoid placing materials or supplies in storage by processing them as they are received. B) The same docks can be used either incoming or outbound shipments. C) The same dock is used to unload and then reload the same truck. D) Warehouse docks are designed in the shape of a cross. E) Docks are placed in the warehouse according to the direction (north, south, east, or west) from which the truck is arriving. Answer: A Key Term: Cross-docking 9) ________ avoids placing materials or supplies in storage by processing them as they are received for shipment. Answer: Cross-docking Key Term: Cross-docking 10) What is cross-docking? What are some of its benefits for manufacturing facilities, distribution centers, and retailers such as Walmart? Answer: Cross-docking avoids placing materials or supplies in storage by processing them as they are received. In a manufacturing facility, product is received directly by the assembly line. In a distribution center, labeled and presorted loads arrive at the shipping dock for immediate rerouting, thereby avoiding formal receiving, stocking/storing, and order-selection activities. Because these activities add no value to the product, their elimination is 100% cost savings. For retailers such as Walmart, cross-docking reduces distribution costs and speeds restocking of stores, thereby improving customer service. Key Term: Cross-docking Section 6 Fixed-Position Layout 1) The dominant problem associated with the fixed-position layout is that workers are fixed in position, and they cannot be reassigned. Answer: FALSE Key Term: Fixed-position layout 2) The fixed-position layout would be MOST appropriate in which of the following settings? A) a fast-food restaurant B) a doctor's office C) a casual dining restaurant D) a cruise ship assembly facility E) a washing machine assembly line Answer: D Key Term: Fixed-position layout 3) For which of the following operations would a fixed-position layout be MOST appropriate? A) assembling automobiles B) producing TV sets C) constructing a highway tunnel D) refining of crude oil E) running an insurance agency Answer: C Key Term: Fixed-position layout 4) Because problems with fixed-position layouts are so difficult to solve well onsite, operations managers: A) virtually never employ this layout strategy. B) utilize this approach only for construction projects such as bridges and office towers. C) increase the size of the site. D) often complete as much of the project as possible offsite. E) utilize this layout only for defense contractors. Answer: D Key Term: Fixed-position layout 5) Which of the following is NOT one of the factors complicating the techniques for addressing the fixed-position layout? A) The volume of materials needed is dynamic. B) At different stages of a project, different materials are needed; therefore, different items become critical as the project develops. C) Takt times at workstations are dynamic. D) There is limited space at virtually all sites. E) All of the above are complicating factors. Answer: C Key Term: Fixed-position layout 6) The project remains in one place and workers and equipment come to that one work area in a(n) ________ layout. Answer: fixed-position Key Term: Fixed-position layout 7) The techniques for addressing the fixed-position layout are complicated by what three factors? What is an alternative strategy to address these? Answer: (1) There is limited space at virtually all sites. (2) At different stages of a project, different materials are needed; therefore, different items become critical as the project develops. (3) The volume of materials needed is dynamic. An alternative strategy is to complete as much of the project as possible offsite. Key Term: Fixed-position layout Section 7 Process-Oriented Layout 1) A process-oriented layout is the traditional way to support a product differentiation strategy. Answer: TRUE Key Term: Process-oriented layout 2) Job lots are groups or batches of parts processed together. Answer: TRUE Key Term: Job lots 3) Process-oriented layouts typically have low levels of work-in-process inventory. Answer: FALSE Key Term: Process-oriented layout 4) The most common tactic to arrange departments in a process-oriented layout is to minimize material handling costs. Answer: TRUE Key Term: Process-oriented layout 5) Which type of layout features departments or other functional groupings in which similar activities are performed? A) process-oriented B) product-oriented C) fixed-position D) mass production E) unit production Answer: A Key Term: Process-oriented layout 6) One of the major advantages of process-oriented layouts is: A) high equipment utilization. B) large work-in-process inventories. C) flexibility in equipment and labor assignment. D) smooth and continuous flow of work. E) small work-in-process inventories. Answer: C Key Term: Process-oriented layout 7) The main issue in designing process-oriented layouts concerns the relative positioning of: A) safety devices. B) departments or work centers. C) raw materials. D) entrances, loading docks, etc. E) supervisors to their employees. Answer: B Key Term: Process-oriented layout 8) Which of the following is NOT an information requirement for solving a load-distance problem to design a process layout? A) a list of departments or work centers B) a projection of work flows between the work centers C) the distance between locations D) a list of product cycle times E) the cost per unit of distance to move loads Answer: D Key Term: Process-oriented layout 9) The major problem addressed by the process-oriented layout strategy is: A) the movement of material to the limited storage areas around the site. B) how to design a continuous flow process. C) the provision of low-cost storage with low-cost material handling. D) minimizing difficulties caused by material flow varying with each product. E) balancing product flow from one work station to the next. Answer: D Key Term: Process-oriented layout 10) The most common tactic followed in process-layout planning is to arrange departments or work centers so they: A) minimize the cost of skilled labor. B) maximize the machine utilization. C) are equally allocated within the available space. D) minimize the costs of material handling. E) produce a perfectly balanced assembly line. Answer: D Key Term: Process-oriented layout 11) A big advantage of a process-oriented layout is: A) its flexibility in equipment and labor assignments. B) its low cost. C) the simplified scheduling problem presented by this layout strategy. D) the ability to employ low-skilled labor. E) its high equipment utilization. Answer: A Key Term: Process-oriented layout 12) The disadvantages of process-oriented layout come from: A) the use of special purpose equipment. B) machine maintenance, which tends to seriously degrade the capacity of the entire system. C) the use of specialized material handling equipment. D) the need for stable demand. E) the flexibility of general-purpose equipment. Answer: E Key Term: Process-oriented layout 13) The typical goal used when developing a process-oriented layout strategy is to: A) minimize the distance between adjacent departments. B) minimize the material handling costs. C) maximize the number of different tasks that can be performed by an individual machine. D) minimize the level of operator skill necessary. E) maximize job specialization. Answer: B Key Term: Process-oriented layout 14) A process layout problem consists of 4 departments, each of which can be assigned to one of four rooms. The number of different solutions to this problem is ________, although all of them may not have different material handling costs. A) 1 B) 4 C) 16 D) 24 E) unknown Answer: D Key Term: Process-oriented layout 15) Solving a load-distance problem for a process-oriented layout requires that: A) the difficulty of movement be the same for all possible paths. B) pickup and setdown costs vary from department to department. C) the cost to move a load be the same for all possible paths. D) takt time be less than 1. E) Proplanner software examines all possible department configurations. Answer: A Key Term: Process-oriented layout 16) ________ layouts deal with low-volume, high-variety production with like machines and equipment grouped together. Answer: Process-oriented Key Term: Process-oriented layout 17) Explain how a load-distance model helps solve problems in process layout. Answer: The problem in process layout is to arrange departments or work centers so as to minimize the costs of material handling. The load-distance model calculates the amount shipped multiplied by the cost per load of these movements from department to department, and so it can find that set of departmental space assignments that minimizes the aggregate material handling cost. Key Term: Process-oriented layout 18) Departments A, B, C, and D need to be assigned to four rooms 1, 2, 3, and 4. These rooms are arranged in a row, in that order, with 20 meters between each. The departmental work flows are contained in the table below. (a) What is the material handling total of assigning A-1, B-2, C-3, D-4? (b) What is the material handling total of assigning A-1, B-3, C-4, D-2? Flow Matrix Dept. A Dept. B Dept. C Dept. D Dept. A 0 30 5 20 Dept. B 5 0 40 20 Dept. C 0 10 0 40 Dept. D 10 5 0 0 Answer: (a) The material handling total of A-1, B-2, C-3, D-4 is 5500. Details: 1-2 (A-B): 20 30 + 20 5 = 700; 1-3 (A-C): 40 5 + 400 = 200; 1-4 (A-D): 60 20 + 6010 = 1800; 2-3 (B-C): 20 40 + 20 10 = 1000; 2-4 (B-D): 40 20 + 40 5 = 1000; and 3-4 (C-D): 20 40 + 20 0 = 800. The sum of these six elements is 5500. (b) The material handling total of A-1, B-3, C-4, D-2 is 5400 (which is also the optimal solution). Details: 1-2 (A-D): 20 20 + 20 10 = 600; 1-3 (A-B): 40 30 + 40 5 = 1400; 1-4 (A-C): 60 5 + 60 0 = 300; 2-3 (B-D): 20 20 + 20 5 = 500; 2-4 (C-D):40 40 + 40 0 = 1600; and 3-4 (B-C): 20 40 + 20 10 = 1000. These six elements sum to 5400. Key Term: Process-oriented layout 19) There are three work centers (A, B, and C) behind the financial aid counter at a nearby university. They can each fit into any of three office spaces (1, 2, and 3) off the corridor behind the desk. There is no student contact in these areas, only workers. The distance 1-2 is 20 feet, 2-3 is 30 feet, and 1-3 is 50 feet. The matrix of work (trips per day) at the three centers are shown in the following table. Remember that each trip must be a round-trip (from 1 to 2 and back, for example). A B C A -- 20 0 B 45 -- 25 C 60 0 -- (a) How many possible assignments are there? List them. (b) Calculate the total distance traveled in each of these assignments. (c) Which assignment minimizes distance traveled? Answer: (a) There are 3! = 6 assignments, listed in the table below. (b) The cost, in feet, of each assignment appears in the table below. (c) The lowest cost assignment is A-2, B-1, C-3. A B C Cost 1 2 3 10,100 1 3 2 10,400 2 1 3 8,700 2 3 1 8,800 3 1 2 11,100 3 2 1 10,900 Key Term: Process-oriented layout 20) An insurance claims processing center has six work centers, any of which can be placed into any of six physical departmental locations. Call the centers 1, 2, 3, 4, 5, and 6, and the departments A, B, C, D, E, and F. The current set of assignments is A-3, B-1, C-6, D-2, E-4, and F-5. The (symmetric) matrix of departmental distances, in meters is shown below. 1 2 3 4 5 6 1 -- 5 30 20 15 20 2 -- 40 15 10 10 3 -- 50 20 5 4 -- 10 35 5 -- 5 6 -- The matrix of work flow (estimated trips per day) is among centers is shown below. A B C D E F A -- 15 20 0 30 0 B 20 -- 50 0 160 10 C 0 50 -- 30 0 30 D 30 60 20 -- 70 0 E 40 0 0 10 -- 60 F 0 0 30 20 50 -- The firm estimates that each trip costs approximately $4. What is the cost of the current assignment? Answer: Load-distance = AB: 30(35) + AC: 5(20) + AD: 40(30) + AE: 50(70) + AF: 20(0) + BC: 20(100) + BD: 5(60) + BE: 20(160) + BF: 15(10) + CD: 10(50) + CE: 35(0) + CF: 5(60) + DE: 15(80) + DF: 10(20) + EF: 10(110) = 1050 + 100 + 1200 + 3500 + 0 + 2000 + 300 + 3200 + 150 + 500 + 0 + 300 + 1200 + 200 + 1100 = 14,800 meters. The current assignment costs: 14,800($4) =$59,200. Key Term: Process-oriented layout 21) An airport is trying to balance where to place the three subgroups (local (A), regional (B), and national (C)) for an airline. The distance between terminals and the number of trips that travelers make between subgroups for flight connections per day are listed. Find the assignment that minimizes the distance travelers must walk. Airline A B C Trips to A - 60 80 Trips to B 50 - 120 Trips to C 100 75 - Terminal 1 2 3 Distance to Terminal 1 - 4000 5000 Distance to Terminal 2 4000 - 6000 Distance to Terminal 3 5000 6000 - Answer: There are 6 possible assignments and the distance traveled for each scenario is 110(Distance A-B) + 195(Distance C-B) + 180(Distance A-C) = total distance. A(1)-B(2)-C(3) = 110(4000) + 195(6000) + 180(5000) = 2510K A(1)-B(3)-C(2) = 110(5000) + 195(6000) + 180(4000) = 2440K A(2)-B(1)-C(3) = 110(4000) + 195(5000) + 180(6000) = 2495K A(2)-B(3)-C(1) = 110(6000) + 195(5000) + 180(4000) = 2355K A(3)-B(2)-C(1) = 110(6000) + 195(4000) + 180(5000) = 2340K A(3)-B(1)-C(2) = 110(5000) + 195(4000) + 180(6000) = 2410K Subgroup A should be assigned terminal 3, subgroup B to terminal 2, and subgroup C to terminal 1 to minimize the distance travelers must go. Key Term: Process-oriented layout Section 8 Work Cells 1) The work cell layout, a special arrangement of machinery and personnel to focus on the production of a single product or group of related products, is for manufacturing applications and has no relevance to services. Answer: FALSE Key Term: Work cell 2) The work cell improves layouts by reducing both floor space and direct labor cost. Answer: TRUE Key Term: Work cell 3) A focused work center is well suited to the production of a large family of products requiring similar processing, even if their demands are not very stable. Answer: FALSE Key Term: Focused work center 4) Which of the following is NOT an advantage of work cells? A) reduced direct labor cost B) decreased equipment and machinery utilization C) heightened sense of employee participation D) reduced raw material and finished goods inventory E) reduced investment in machinery and equipment Answer: B Key Term: Work cell 5) Balancing a work cell is done: A) before the work cell equipment is sequenced. B) as part of the process of building an efficient work cell. C) before takt time is calculated. D) so that each assembly line workstation has exactly the same amount of work. E) to minimize the total movement in a process layout. Answer: B Key Term: Work cell 6) Mathematically, takt time is: A) total work time available divided by units required. B) units required divided by workers required. C) a fictional time increment similar to a therblig. D) workers required divided by total operation time required. E) units required divided by total work time available. Answer: A Key Term: Takt time 7) Which of the following is NOT one of the requirements of cellular production? A) testing (poka-yoke) at each station in the cell B) adequate volume for high equipment utilization C) a high level of training, flexibility, and empowerment of employees D) being self-contained, with its own equipment and resources E) identification of families of products, often through the use of group technology codes or equivalents Answer: B Key Term: Work cell 8) A(n) ________ is a special product-oriented arrangement of machines and personnel in what is ordinarily a process-oriented facility. Answer: work cell Key Term: Work cell 9) ________ is the pace (frequency) of production necessary (time per unit) to meet customer orders. Answer: Takt time Key Term: Takt time 10) "Having a focused work center is like having a plant within a plant." Discuss. Include in your discussion what conditions make focused work centers appropriate. Answer: A focused work center is a permanent or semi-permanent product-oriented arrangement of machines and personnel. It moves production to a large work cell that remains part of the present facility. A focused work center may be appropriate when a firm has identified a family of similar products that have a large and stable demand. Key Term: Focused work center 11) Why do work cells increase the utilization of equipment and machinery? Answer: Work cells increase the utilization of equipment and machinery because of better scheduling and faster material flow. Key Term: Work cell 12) What are the advantages of focused factories? Answer: Focused factories are better able to stay in tune with their customers, produce quality products, and operate at higher margins. Key Term: Focused factory 13) Identify the four requirements for cellular production. Answer: (1) identification of families of products, often through the use of group technology codes or equivalents; (2) a high level of training, flexibility, and empowerment of employees; (3) being self-contained, with its own equipment and resources; (4) testing (poka-yoke) at each station in the cell Key Term: Work cell 14) A work cell is required to make 200 computerized diagnostic assemblies (for installation into hybrid automobiles) each day. The cell currently works an eight hour shift, of which seven hours is available for productive work. What is takt time for this cell? Answer: Takt time = 420 minutes / 200 units required = 2.1 minutes Key Term: Takt time 15) A work cell is scheduled to build 120 digital light processor (DLP) assemblies each week. These assemblies are later installed into home theater projection systems. The work cell has 7.5 hours of productive work each day, six days per week. What is takt time for this cell? Answer: The cell has 7.5 6 = 45 hours (or 2700 minutes) of work time each week. Takt time = 2700 / 120 = 22.5 minutes. Key Term: Takt time 16) A work cell is required to make 80 computerized diagnostic assemblies (for installation into hybrid automobiles) each day. The cell currently works an eight hour shift, of which seven hours are available for productive work. These assemblies require five operations, with times of 1.0, 1.8, 2.4, 2.5, and 1.4 minutes each. (a) What is takt time for this cell? (b) How many workers will be needed? Answer: (a) Takt time = 420 minutes / 80 units = 5.25 minutes. (b) Total operation time is 1.0 + 1.8 + 2.4 + 2.5 + 1.4 = 9.1 minutes. Workers required = 9.1 / 5.25 = 1.73 or 2. Key Term: Takt time 17) A work cell is required to make 140 computerized diagnostic assemblies (for installation into hybrid automobiles) each day. The cell currently works an eight hour shift, of which seven hours is available for productive work. These assemblies require five operations. Standard times for these operations are: Operation A, 3.0 minutes, B, 1.8 minutes, C, 2.4 minutes, D, 2.5 minutes, and E, 1.4 minutes. (a) What is takt time for this cell? (b) How many workers will be needed to achieve this schedule? Answer: (a) Takt time = 420 / 140 = 3 minutes/unit. (b) Total operation time = 3.0 + 1.8 + 2.4 + 2.5 + 1.4 = 11.1 minutes. A minimum of four workers are required (11.1 / 3 = 3.7). Key Term: Takt time 18) Brandon's computer shop has hired a consultant to help apply operations management techniques to increase profits. Currently the shop sells most of its computers to a high-end customized online retailer and sales are steady at 250 per month. A single work cell produces the computers. To produce the computer, three operations are required. First the parts must be assembled, next software must be installed, and finally the computer must be safely packed and labeled for shipping. These operations take 2 hours, 5 hours, and 1 hour respectively. If there are 6 available work hours each day and the shop operates 20 days per month find: (a) the takt time, and (b) the number of workers Brandon should hire. Answer: (a) Takt time = (6 hours/day * 20 days/month)/(250 units/month) = .48 hours per computer (or 28.8 minutes) (b) Total operation time = 2+5+1 = 8 hours. Workers required = operation time / takt time = 8/.48 = 16.67 = 17 workers required Key Term: Takt time 19) A manufacturing work cell has a takt time of 7 minutes. Exactly 10 workers are required. Suppose that the work cell delivers 68 units each day. (a) What is the total operation time? (b) What is the amount of time worked during the day for all 10 workers combined? (c) If the plant is open for only 8 hours per day, can the staff meet demand? Answer: (a) Total operation time = Workers required takt time = 10(7 minutes) = 70 minutes (b) Time worked = Takt time Units Delivered # workers = 7 minutes (68) 10 =4760 minutes = 79.33 hours (c) 10 workers 8 hours/day = 80 hours per day are available. From (b), only 79.33 are required, so the workers can meet demand. Key Term: Takt time Section 9 Repetitive and Product-Oriented Layout 1) A fabrication line and an assembly line are both types of repetitive and product-focused layout, but only the fabrication line utilizes workstations. Answer: FALSE 2) The biggest advantage of a product layout is its flexibility to handle a varied product mix. Answer: FALSE 3) The minimum number of workstations depends upon the set of task times and the precedence chart, but not the number of units scheduled. Answer: FALSE Key Term: Cycle time 4) A product requires 24 separate tasks, and the sum of those task times is 14 minutes. If the cycle time is 2 minutes, then at least 12 workstations will be needed. Answer: FALSE Key Term: Cycle time 5) If the schedule calls for the production of 120 units per day and 480 minutes of production time are available per day, the cycle time would be 4 minutes. Answer: TRUE Key Term: Cycle time 6) Product-oriented layouts tend to have high levels of work-in-process inventories. Answer: FALSE 7) One drawback of a product-oriented layout is that work stoppage at any one point ties up the whole operation. Answer: TRUE 8) Cycle time is the maximum time that the product is allowed at each workstation. Answer: TRUE Key Term: Cycle time 9) Heuristics are problem-solving procedures that mathematically optimize the solution. Answer: FALSE Key Term: Heuristic 10) Which one of the following is NOT common to repetitive and product-oriented layouts? A) a high rate of output B) specialized equipment C) ability to adjust to changes in demand D) low unit costs E) standardized products Answer: C 11) A product-oriented layout would be MOST appropriate for which one of the following businesses? A) fast food B) steel making C) insurance sales D) clothing alterations E) a grocery store Answer: B 12) The assumptions necessary for a successful product-oriented layout include all EXCEPT which of the following? A) adequate volume for high equipment utilization B) standardized product C) volatile product demand D) adequately standardized supplies of raw materials and components E) All of the above are appropriate assumptions. Answer: C 13) Which of the following is TRUE regarding fabrication lines? A) They are the same thing as assembly lines. B) They are the same thing as focused factories. C) They are a special type of process-oriented layout. D) They are usually machine-paced as opposed to worker-paced. E) They require completely different line balancing techniques than do assembly lines. Answer: D Key Term: Fabrication line 14) The central problem in product-oriented layout planning is: A) minimizing material handling within workstations. B) minimizing labor movement between workstations. C) equalizing the space allocated to the different workstations. D) maximizing equipment utilization. E) minimizing the imbalance in the workloads among workstations. Answer: E Key Term: Assembly-line balancing 15) Which of the following is a disadvantage of product-oriented layout? A) There is a lack of flexibility necessary for handling a variety of products. B) High volume is required because of the large investment needed to establish the process. C) Work stoppage at any one point can tie up the whole operation. D) There is a lack of flexibility necessary for handling a variety of production rates. E) All of the above are disadvantages of product-oriented layouts. Answer: E 16) Which of the following is one of the main advantages of a product-oriented layout? A) high customer exposure rates B) employability of highly skilled labor C) high flexibility D) low capital cost E) low variable cost per unit Answer: E 17) In a product-oriented layout, what is the process of deciding how to assign tasks to workstations? A) station balancing B) process balancing C) task allocation D) assembly-line balancing E) work allocation Answer: D Key Term: Assembly-line balancing 18) In assembly-line balancing, the theoretical minimum number of workstations is: A) the ratio of the sum of all task times to cycle time. B) always (when a fraction) rounded upward to the next larger integer value. C) not always possible to reach when tasks are actually assigned to stations. D) all of the above. E) none of the above. Answer: D Key Term: Assembly-line balancing 19) In assembly-line balancing, cycle time (the ratio of available production time to scheduled production) is the: A) minimum time that a product is allowed at each workstation. B) maximum time that a product is allowed at each workstation. C) inverse of the minimum number of workstations needed. D) sum of all the task times divided by the maximum number of workstations. E) equivalent of the maximum task time among all tasks. Answer: B Key Term: Cycle time 20) A production line is to be designed to make 500 El-More dolls per day. Each doll requires 11 activities totaling 16 minutes of work. The factory operates 750 minutes per day. What is the required cycle time for this assembly line? A) 0.5 minutes B) 1.5 minutes C) 2 minutes D) 5,500 minutes E) 4.26 minutes Answer: B Key Term: Cycle time 21) A production line is to be designed for a job with four tasks. The task times are 2.4 minutes, 1.4 minutes, 0.9 minutes, and 1.7 minutes. After line balancing, the largest possible assigned cycle time is ________ minutes, and the smallest possible assigned cycle time is ________ minutes. A) 1.8; 1.4 B) 1.6; 0.9 C) 6.4; 2.4 D) 2.4; 0.9 E) 6.4; 0.9 Answer: C Key Term: Cycle time 22) Cycle time is computed as: A) desired output divided by the daily operating time. B) daily operating time divided by the product of desired output and the sum of job times. C) the product of desired output and the sum of job times divided by daily operating time. D) daily operating time divided by the scheduled output. E) 1.00 minus station time. Answer: D Key Term: Cycle time 23) Four hundred and eighty minutes of production time are available per day. Scheduled production is 120 units per day. What is the required cycle time? A) 4 minutes B) 5 minutes C) 6 minutes D) 7 minutes E) 8 minutes Answer: A Key Term: Cycle time 24) A production line is to be designed for a product whose completion requires 21 minutes of work. The factory works 400 minutes per day. Can an assembly line with five workstations make 100 units per day? A) yes, with exactly 100 minutes to spare B) no, but four workstations would be sufficient C) no, it will fall short even with a perfectly balanced line D) yes, but the line's efficiency is very low E) cannot be determined from the information given Answer: C Key Term: Assembly-line balancing 25) Four hundred and eighty minutes of production time are available per day. The schedule calls for the production of 80 units per day. Each unit of the product requires 30 minutes of work. What is the theoretical minimum number of workstations? A) 2 B) 3 C) 4 D) 5 E) 6 Answer: D Key Term: Assembly-line balancing 26) Which of the following is NOT a heuristic rule for assigning tasks to workstations in a product layout? A) longest tasks first B) in order of most number of following tasks C) median tasks first D) shortest tasks first E) in accordance with positional weight Answer: C Key Term: Heuristic 27) If a layout problem is solved by use of heuristics, this means that: A) there is no other way to solve the problem. B) no computer software is available. C) the problem has only a few alternatives to evaluate. D) no optimum solution exists. E) a satisfactory, but not necessarily optimal, solution is acceptable. Answer: E Key Term: Heuristic 28) Which of the following is a common heuristic for assembly line balancing? A) first come, first served B) least preceding tasks C) earliest due date first D) ranked positional weight E) most preceding tasks Answer: D Key Term: Heuristic 29) An assembly line consists of 21 tasks grouped into 5 workstations. The sum of the 21 task times is 85 minutes. The largest assigned cycle time is 20 minutes. What is the efficiency of this line? A) 4.2 percent B) 17 percent C) 85 percent D) 100 percent E) 21 percent Answer: C Key Term: Assembly-line balancing 30) An assembly line consists of 158 tasks grouped into 32 workstations. The sum of all task times is 105 minutes. The largest assigned cycle time is 4 minutes. What is the efficiency of this line? A) 8 percent B) 21 percent C) 82 percent D) 100 percent E) 81 percent Answer: C Key Term: Assembly-line balancing 31) A(n) ________ line is a machine-paced product-oriented facility for building components. Answer: fabrication Key Term: Fabrication line 32) ________ is the maximum time that the product is allowed at each workstation. Answer: Cycle time Key Term: Cycle time 33) Explain what the purpose of assembly-line balancing is. Describe briefly how it is done. Answer: Assembly-line balancing attempts to put equal amounts of work into each of the workstations that assemble a product. The technique begins with a task list and precedence chart; to this is added demand data, from which cycle time can be computed. This is the maximum time that a product is allowed at each workstation. Then the theoretical number of workstations is calculated. Each required task is then assigned into a workstation, often based on one of the five common heuristic rules. Key Term: Assembly-line balancing 34) Identify the formulas for the following terms that occur in assembly line balancing: (1) cycle time, (2) minimum number of workstations, and (3) efficiency. Answer: (1) Cycle time = Production time available per day / Units required per day; (2) Minimum number of workstations = The total of all task times for the product / Cycle time (3) Efficiency = The total of all task times for the product / [(Actual # of workstations)(Largest assigned cycle time)] Key Term: Assembly-line balancing 35) Identify the five common layout heuristics used to assign tasks to workstations in assembly-line balancing. Answer: (1) longest task (operation) time; (2) most following tasks; (3) ranked positional weight; (4) shortest task (operation) time; (5) least number of following tasks Key Term: Heuristic 36) Assembly line balancing has just been used to solve a product layout problem. Two solutions look especially attractive to the plant managers. Both solutions make the same output per day, and both have the same number of workstations. The managers were going to break the tie by looking at line efficiency, but discovered that both lines had the same efficiency as well. Should they have been surprised at this? Explain. Answer: No, they should not be surprised. Efficiency is the ratio of actual work needed per unit to time available. Work needed is clearly the same in both cases as the product is the same. Work available is also the same, since both lines have the same number of stations and the same maximum assigned cycle time (which determines daily output). Once cycle time and number of stations are known, so is efficiency, no matter what tasks are assigned to what stations within that framework. Key Term: Assembly-line balancing 37) What are the advantages and disadvantages of product-oriented layouts? Answer: The advantages of a product-oriented layout are: The low variable cost per unit usually associated with high-volume, standardized products Low material handling costs Reduced work-in-process inventories Easier training and supervision Rapid throughput The disadvantages are: The high volume required because of the large investment needed to establish the process Work stoppage at any point can tie up the whole operation. The process flexibility necessary for a variety of products and production rates can be a challenge. 38) Develop a solution for the following line balancing problem, allowing a cycle time of 5 minutes. a. Draw the precedence diagram for the set of tasks. b. Calculate the theoretical minimum number of workstations. c. Balance this line using the longest task time heuristic. d. What tasks are assigned to which stations? e. Does the solution have the minimum number of stations? Explain. f. How much idle time is there, summed over all workstations? g. What is the efficiency of this line? Work Task Task Time (seconds) Task Predecessor(s) A 70 - B 60 A C 120 B D 60 - E 240 C, D F 100 A G 190 E, F Answer: The theoretical minimum number of workstations is 3. Balance places ABDF in station 1, C in station 2, E in station 3, and G in station 4. The solution uses four stations, not three. The POM for Windows solution is shown below. Idle time is distributed 10, 180, 60, and 110 per station. There are 360 seconds of idle time in the system. Efficiency is 70.0%.

Q: Operations Management, 11e (Heizer/Render) Section 1 The Strategic Importance of Location 1) FedEx chose Memphis, Tennessee, for its central location, or "hub," primarily because of the incentives offered by the city of Memphis and the state of Tennessee. Answer: FALSE 2) FedEx chose Memphis, Tennessee, as its U.S. hub because: A) the city is in the center of the United States, geographically. B) the airport has relatively few hours of bad weather closures. C) it needed a means to reach cities to which it did not have direct flights. D) the firm believed that a hub system was superior to traditional city-to-city flight scheduling. E) All of the above are true. Answer: E 3) Which of the following statements regarding FedEx is TRUE? A) Its hub in Memphis, Tennessee, was selected because of its low cost. B) Memphis, Tennessee, is the only hub in the company's global flight network. C) FedEx believes the hub system helps reduce mishandling and delays due to better controls. D) FedEx uses a hub system in the United States, but a city-to-city network in other countries. E) Memphis is FedEx's only hub airport in the United States. Answer: C Key Term: Global company profile 4) Industrial location analysis typically attempts to: A) minimize costs. B) maximize sales. C) focus more on human resources. D) avoid countries with strict environmental regulations. E) ignore exchange rates and currency risks. Answer: A 5) A location decision for an appliance manufacturer would tend to have what type of focus? A) cost focus B) focus on finding very highly skilled technicians C) revenue focus D) environmental focus E) education focus Answer: A 6) A location decision for a traditional department store (e.g., Macy's) would tend to have what type of focus? A) cost focus B) labor focus C) revenue focus D) environmental focus E) education focus Answer: C 7) As described in the book Aerotropolis, nowadays location decisions worldwide are often being based on what? A) rivers B) rail hubs C) interstate highways D) ports E) airports Answer: E 8) FedEx schedules its aircraft using a(n) ________ system, which it credits with reducing package mishandling and delay in transit. Answer: central hub 9) Why does FedEx use a central hub airline network, rather than a "point-to-point" network? Describe FedEx's approach to choosing its superhub. Answer: The hub system is more centralized, and allows for greater control; greater control reduces package mishandling and transit delays. Also, the hub permits service to a far greater number of points with fewer aircraft than a point-to-point network would. Their U.S. hub in Memphis reflects a need to be geographically centralized, and in a location where schedules can more reliably be kept because weather delays are minimized. 10) State the fundamental objective of a firm's location strategy. How is this basic objective carried out by industrial or goods-producing firms; how does that differ for service firms? Answer: The fundamental objective is to maximize the benefit of location to the firm. For industrial location decisions, the focus is frequently on minimizing cost, because cost often varies dramatically from one location to another. Service location decisions often focus on maximizing revenues. Section 2 Factors That Affect Location Decisions 1) Lists have been developed that rank countries on issues such as "competitiveness" and "corruption." Answer: TRUE 2) The ratio of labor cost per day to productivity, in units per day, is the labor cost per unit. Answer: TRUE 3) For a location decision, labor productivity may be important in isolation, but low wage rates are a more important criterion. Answer: FALSE 4) Unfavorable exchange rates can offset other savings in a location decision. Answer: TRUE 5) An example of an intangible cost, as it relates to location decisions, is the quality of education. Answer: TRUE Key Term: Intangible costs 6) In location decisions, intangible costs are easier to measure than tangible costs. Answer: FALSE Key Term: Intangible costs 7) Location decisions are based on many things, including costs, revenues, incentives, attitudes, and intangibles, but not on ethical considerations. Answer: FALSE 8) Manufacturers may want to locate close to their customers if the transportation of finished goods is expensive or difficult. Answer: TRUE 9) One reason for a firm locating near its competitors is the presence of a major resource it needs. Answer: TRUE Key Term: Clustering 10) Why is Northern Mexico used as a cluster for electronics firms? A) high traffic flows B) venture capitalists located nearby C) natural resources of land and climate D) NAFTA E) high per capita GDP Answer: D Key Term: Clustering 11) Among the following choices, an operations manager might best evaluate political risk of a country by looking at which type of country ranking? A) based on competitiveness B) based on cost of doing business C) based on corruption D) based on magnitude of government social programs E) based on average duration between presidential/prime minister elections Answer: C 12) ________ and ________ are to key country success factors as ________ and ________ are to key region success factors. A) Cultural issues, location of markets; site size and cost, zoning restrictions B) Exchange rates, labor availability; site size and cost, environmental impact C) Labor cost, currency risk; land costs, proximity to customers D) Land costs, proximity to customers; labor cost, air and rail systems E) All of the above are accurate relationships. Answer: C 13) Which of the following workers is the most productive? A) $50 wages, 10 parts produced B) $10 wages, 1 part produced C) $30 wages, 5 parts produced D) $100 wages, 21 parts produced E) $500 wages, 100 parts produced Answer: D 14) A employee produces 15 parts during a shift in which he made $90. What is the labor content of the product? A) $90 B) $5 C) $6 D) $0.167 E) $1,350 Answer: C 15) The reason fast food restaurants often are found in close proximity to each other is: A) they enjoy competition. B) location clustering near high traffic flows. C) low cost. D) availability of skilled labor. E) all of the above. Answer: B Key Term: Clustering 16) Currency risk is based on what assumption? A) Firms that do not continuously innovate will lose market share. B) Values of foreign currencies continually rise and fall in most countries. C) Changing product lines by reacting to every current trend may alienate the customer base. D) The value of one dollar today is greater than the value of one dollar to be received one year from now. E) The U.S. stock market fluctuates daily. Answer: B 17) Governmental attitudes toward issues such as private property, intellectual property, zoning, pollution, and employment stability may change over time. What is the term associated with this phenomenon? A) bureaucratic risk B) political risk C) legislative risk D) judicial risk E) democratic risk Answer: B 18) Globalization of the location decision is the result of all EXCEPT which of the following? A) market economics B) higher quality of labor overseas C) ease of capital flow between countries D) high differences in labor costs E) more rapid, reliable travel and shipping Answer: B 19) In location planning, environmental regulations, cost and availability of utilities, and taxes are: A) global factors. B) country factors. C) regional/community factors. D) site-related factors. E) none of the above. Answer: C 20) Which of the following is usually NOT one of the top considerations in choosing a country for a facility location? A) availability of labor and labor productivity B) exchange rates C) attitude of governmental units D) zoning regulations E) location of markets Answer: D 21) When making a location decision at the country level, which of these would be considered? A) corporate desires B) land/construction costs C) air, rail, highway, waterway systems D) zoning restrictions E) location of markets Answer: E 22) Which of these factors would be considered when making a location decision at the region/community level? A) government rules, attitudes, stability, incentives B) cultural and economic issues C) zoning restrictions D) environmental impact issues E) proximity to raw materials and customers Answer: E 23) When making a location decision at the region/community level, which of these would be considered? A) government rules, attitudes, stability, incentives B) cultural and economic issues C) cost and availability of utilities D) zoning restrictions E) air, rail, highway, waterway systems Answer: C 24) Which of these factors would be considered when making a location decision at the site level? A) government rules, attitudes, stability, incentives B) cultural and economic issues C) zoning regulations D) cost and availability of utilities E) proximity to raw materials and customers Answer: C 25) Tangible costs include which of the following? A) climatic conditions B) availability of public transportation C) taxes D) quality and attitude of prospective employees E) zoning regulations Answer: C Key Term: Tangible costs 26) Intangible costs include which of the following? A) quality of prospective employees B) quality of education C) availability of public transportation D) all of the above E) none of the above Answer: D Key Term: Intangible costs 27) Which of the following statements regarding "proximity" in the location decision is FALSE? A) Service organizations find that proximity to market is the most critical primary location factor. B) Manufacturers want to be near customers when their product is bulky, heavy, or fragile. C) Perishability of raw materials is a good reason for manufacturers to locate near the supplier, not the customer. D) Reduction in bulk is a good reason for a manufacturer to locate near the supplier. E) Clustering among fast food chains occurs because they need to be near their labor supply. Answer: E Key Term: Clustering 28) Which of the following is the best example of the proximity rule that, for service firms, proximity to market is the most important location factor? A) Soft drinks are bottled in many local plants, where carbonated water is added to proprietary syrups that may have been shipped long distances. B) Few people will travel out-of state for a haircut. C) Patients will travel very long distances to have their hernia surgeries performed at ShouldiceHospital. D) Furniture makers choose to locate near the source of good hardwoods, even though it means locating near other furniture manufacturers. E) Metal refiners (smelters) locate near mines to accomplish significant weight reduction near the metal's source. Answer: B 29) ________ costs are readily identifiable and can be measured with precision. Answer: Tangible Key Term: Tangible costs 30) Political risk, cultural issues, and exchange rates are among those ________ that affect which country will be selected for a location decision. Answer: key success factors 31) Labor cost per unit is also referred to as ________. Answer: labor content 32) ________ occurs when competing companies locate near each other because of a critical mass of information, talent, venture capital, or natural resources. Answer: Clustering Key Term: Clustering 33) Identify five factors that have fostered globalization. Answer: Globalization has taken place because of the development of: (1) market economics; (2) better international communications; (3) more rapid, reliable travel and shipping; (4) ease of capital flow between countries; and (5) high differences in labor costs. 34) Identify five factors that affect location decisions at the site level. Answer: Factors that affect location decisions at the site level include site size and cost; air, rail, highway, waterway systems; zoning restrictions; nearness of services/supplies needed; and environmental impact issues. 35) What is the role of labor productivity in location decisions? Answer: Labor productivity is the number of units output per hour of labor input. For location decisions, this is more often displayed in the form of "labor content," which is the dollar labor cost per unit. Labor content provides a useful comparison in cases where wage rates and productivities vary greatly from country to country. In short, low productivity can negate low wages. 36) What is the impact of exchange rates on location decisions? Answer: Exchange rates fluctuate, and they can negate savings from low wage rates. 37) Why is "quality of life" an element of intangible costs associated with location decisions? Provide an example as part of your discussion. Answer: Quality of life affects location decisions in at least one indirect way. Consider a firm that has narrowed its location to two cities. One city has an abundance of educational and recreational facilities, good hospitals and parks. The other has very little of these elements. If you were a prospective employee, in which city would you rather live? Low quality of life can drive up labor costs, and it might also have an impact on training costs and health care costs. Key Term: Intangible costs 38) "Proximity" or closeness implies that a firm should locate "close" to something. What are the three kinds of proximity described in the text? What are the basic conditions under which each is appropriate? What kinds of firms are likely to use each of these? Answer: The three are proximity to markets, proximity to suppliers, and proximity to competitors. Proximity to markets is appropriate when customers will not travel far to get the good or service, or when delivering the product to the customer is costly or difficult. Many services must be close to their markets, as must home construction. Proximity to suppliers is appropriate when raw materials are perishable, or when supplies are costly or bulky to transport. Seafood processors need to be near the docks, and smelters need to be near the mines. Proximity to competitors reflects a kind of synergyretailers find that volume is higher when there are more competitors nearby, because this clustering brings higher traffic counts. 39) What is it called when competing companies locate next to each other? Why do they do this? Answer: It is called clustering. In many cases, this occurs because of a critical mass of information, talent, venture capital, or natural resources. Alternately, clustering occurs because several firms close together create a larger total market than the same firms separated. Key Term: Clustering Section 3 Methods of Evaluating Location Alternatives 1) The graphic approach to locational cost-volume analysis displays the range of volume over which each location is preferable. Answer: TRUE Key Term: Locational cost-volume analysis 2) The factor-rating method can consider both tangible and intangible costs. Answer: TRUE Key Term: Factor-rating method 3) The center-of-gravity method finds the location of a centralized facility, such as a distribution center, that will maximize the organization's revenue. Answer: FALSE Key Term: Center-of-gravity method 4) The transportation model calculates an optimal shipping system between a central facility and several outlying customers. Answer: FALSE Key Term: Transportation model 5) Which of the following statements regarding the center-of-gravity method is FALSE? A) It is designed to minimize the maximum possible travel distance to any of the locations. B) The optimal x- and y-coordinates are calculated separately. C) The optimal solution is unconstrained, so it could suggest a location in the middle of a body of water. D) The weights used are the quantity of goods moved to or from each location. E) The origin of the coordinate system and the scale used are arbitrary, just as long as the relative distances are correctly represented. Answer: A Key Term: Center-of-gravity method 6) Community attitudes, zoning restrictions, and quality of labor force are likely to be considered in which of the following location decision methods? A) transportation method B) locational cost-volume analysis C) center-of-gravity method D) simulation E) factor-rating method Answer: E Key Term: Factor-rating method 7) Which of the following methods best considers intangible costs related to a location decision? A) crossover methods B) locational cost-volume analysis C) factor-rating method D) the transportation method E) center-of-gravity method Answer: C Key Term: Factor-rating method 8) Evaluating location alternatives by comparing their composite (weighted-average) scores involves which of the following? A) factor-rating analysis B) cost-volume analysis C) transportation model analysis D) linear regression analysis E) crossover analysis Answer: A Key Term: Factor-rating method 9) A clothing chain is considering two different locations for a new retail outlet. They have identified the four factors listed in the following table as the basis for evaluation, and have assigned weights as shown. The manager has rated each location on each factor, on a 100-point basis, as shown under the respective columns for Barclay and Chester. Factor Factor Description Weight Barclay Chester 1 Average community income .40 30 20 2 Community growth potential .25 40 30 3 Availability of public transportation .15 20 20 4 Labor cost .20 10 30 What is the score for Chester? A) 10.00 B) 24.50 C) 25.75 D) 27.00 E) 100.00 Answer: B Key Term: Factor-rating method 10) What is an approach to location analysis that includes both qualitative and quantitative considerations? A) locational cost-volume analysis B) factor-rating method C) transportation model D) center-of-gravity method E) make-or-buy analysis Answer: B Key Term: Factor-rating method 11) On the crossover chart where the costs of two or more location alternatives have been plotted, the quantity at which two cost curves cross is the quantity at which: A) fixed costs are equal for two alternative locations. B) variable costs are equal for two alternative locations. C) total costs are equal for all alternative locations. D) fixed costs equal variable costs for one location. E) total costs are equal for two alternative locations. Answer: E Key Term: Locational cost-volume analysis 12) A full-service restaurant is considering opening a new facility in a specific city. The table below shows its ratings of four factors at each of two potential sites. Factor Weight GaryMall Belt Line Affluence of local population .20 30 30 Traffic flow .40 50 20 Parking availability .20 30 40 Growth potential .20 10 30 The score for GaryMall is ________ and the score for Belt Line is ________. A) 120; 120 B) 22; 24 C) 18; 120 D) 34; 28 E) none of the above Answer: D Key Term: Factor-rating method 13) A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs $0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.35 per unit. If annual demand is expected to be 10 million units, which plant offers the lowest total cost? A) Plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units. B) Plant B, because it is cheaper than Plant A for all volumes over 8,000,000 units. C) Plant A, because it is cheaper than Plant B for all volumes. D) Plant B, because it has the lower variable cost per unit. E) Neither Plant A nor Plant B, because the crossover point is at 10 million units. Answer: A Key Term: Locational cost-volume analysis 14) The center-of-gravity method is used primarily to determine what type of locations? A) service locations B) manufacturing locations C) distribution center locations D) supplier locations E) call center locations Answer: C Key Term: Center-of-gravity method 15) A regional bookstore chain wants to build a distribution center that is centrally located for its eight retail outlets. It will most likely employ which of the following tools of analysis? A) assembly line balancing B) load-distance analysis C) center-of-gravity method D) linear programming E) locational cost-volume analysis Answer: C Key Term: Center-of-gravity method 16) East Texas Seasonings is preparing to build one processing center to serve its four sources of seasonings. The four source locations are at coordinates shown below. Also, the volume from each source is provided. What is the center of gravity? X-coordinate Y-coordinate Volume Athens, Texas 30 30 150 Beaumont, Texas 20 10 350 Carthage, Texas 10 70 100 Denton, Texas 50 50 200 A) X = 28.125; Y = 31.25 B) X = 22000; Y = 24000 C) X = 27.5; Y = 40 D) center of gravity = 28 E) X = 25; Y = 40 Answer: A Key Term: Center-of-gravity method 17) A county wants to build one centrally-located processing facility to serve the county's four recycling drop-off locations. The four drop-offs have characteristics as given in the table below. What is the approximate center of gravity of these four locations? Location X-coordinate Y-coordinate Tonnage Drop-off point A 1 8 10 Drop-off point B 6 7 35 Drop-off point C 6 2 25 Drop-off point D 4 7 50 A) (4.75, 6.04) B) (17, 24) C) (33.5, 135.4) D) (6, 4.25) E) (570, 725) Answer: A Key Term: Center-of-gravity method 18) Production and transportation costs are always considered in which of the following location decision methods? A) traffic counts B) transportation model C) purchasing power D) proximity of markets E) clustering Answer: B Key Term: Transportation model 19) The transportation model, when applied to location analysis: A) minimizes total fixed costs. B) minimizes total production and transportation costs. C) minimizes total transportation costs. D) maximizes revenues. E) minimizes the movement of goods. Answer: B Key Term: Transportation model 20) The ________ method is popular because a wide variety of factors, from education to recreation to labor skills, can be objectively included. Answer: factor-rating Key Term: Factor-rating method 21) The ________ is a mathematical technique used for finding the best location for a single distribution point that services several stores or areas. Answer: center-of-gravity method Key Term: Center-of-gravity method 22) The ________ is used to determine the best pattern of shipments from several points of supply to several points of demand. Answer: transportation model Key Term: Transportation model 23) Identify the four major quantitative methods for solving location problems. Answer: Factor-rating method, locational cost-volume analysis, center-of-gravity method, and transportation model. 24) What are the advantages and disadvantages of the use of the factor-rating method? Answer: Factor rating can handle a mix of quantitative and qualitative variables; its calculations are simple and straightforward. Factor rating is subject to sensitivity to small swings in weights and scores, and is subject to subjectivity (different judges see different scores for same site). Key Term: Factor-rating method 25) What kinds of location decisions are appropriate for the use of locational cost-volume analysis? Write a brief paragraph explaining how the method can assist an operations manager in choosing among alternative sites in making a location decision. Answer: Crossover analysis is appropriate when the primary focus of a location decision is cost. For each alternative site, crossover analysis constructs a total cost curve composed of a fixed cost and a variable cost that depends upon volume. Where these cost curves intersect (or cross over) is the point at which two alternatives have the same cost. The graph of the cost curves of all alternative sites will display the range of volumes over which each site has the lowest cost of all alternatives. Key Term: Locational cost-volume analysis 26) What kinds of location decisions are appropriate for the use of center-of-gravity analysis? What variable is being optimized in this analysis? Answer: The center-of-gravity technique is appropriate when the location decision must find a single centrally-located site to serve any number of outlying points; locating a distribution center to serve a dozen retail stores is an example. The analysis leads to a location that (approximately) minimizes the distribution cost (or total distance traveled) between all outlying points and the center or hub. Key Term: Center-of-gravity method 27) A manufacturing company preparing to build a new plant is considering three potential locations for it. The fixed and variable costs for the three alternative locations are presented below. a. Complete a numeric locational cost-volume analysis. b. Indicate over what range each of the alternatives A, B, C is the low-cost choice. c. Is any alternative never preferred? Explain. Costs A B C Fixed ($) 2,500,000 2,000,000 3,500,000 Variable ($ per unit) 21 25 15 Answer: B is cheapest up to 125,000 units; C is cheapest after 166,667 units. A is cheapest in between. The B-C crossover is not relevant. Thus each alternative has an attractive range. Break-even points Units Dollars Option A vs. Option B 125,000 5,125,000 Option A vs. Option C 166,667 6,000,000 Option B vs. Option C 150,000 5,750,000 Key Term: Locational cost-volume analysis 28) A farmers' cooperative association plans to build a new sugar mill in Southwestern Louisiana. The primary objective of the mill is to provide the farmers with a place to take their crop for processing that will reduce their transportation costs. The members of the co-op believe that the center-of-gravity method is appropriate for this objective. While there are over 200 sugar cane farms in the region, they are tightly clustered around six villages. Using the data below, use the center-of-gravity method to calculate the coordinates of the best location for this mill. All mileage references use the city of Lake Charles as (0,0). Village Miles East of Lake Charles Miles North of Lake Charles Sugar Cane tonnage Arceneaux 90 10 240,000 Boudreaux 140 60 320,000 Cancienne 20 70 450,000 Darbonne 50 20 120,000 Evangeline 100 80 60,000 Fontenot 10 120 140,000 Answer: The center of gravity, weighted by the tonnage at each village cluster, is about 66.8 miles east of Lake Charles and 58.0 miles north of Lake Charles.

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