Question
In: Accounting
Q1)A company is considering two location alternatives for a new facility. The management has identified the...
Q1)A company is considering two location alternatives for a new facility. The management has identified the relevant factors for choosing a location and scored the non-quantitative factors as shown below.
|
FACTOR |
WEIGHT |
LOCATION A |
LOCATION B |
|
Labor availability |
20 |
80 |
95 |
|
Supplier network |
20 |
90 |
85 |
|
Quality of life |
15 |
95 |
100 |
|
Initial fixed cost |
5 |
||
|
Operating cost |
35 |
||
|
Business friendliness |
5 |
50 |
90 |
Initial fixed cost and operating cost are quantitative factors. The firm management is undecided about how to score these factors but it has the following information about them:
Location A
Initial fixed cost (annualized) = $200,000
Operating cost = $2800 per unit
Location B
Initial fixed cost (annualized) = $100,000
Operating cost = $3200 per unit
The firm expects the annual demand to be 10,000 units for their new facility. At their existing facility, operations have been streamlined very well – they have achieved a unit cost of $ 2145 per unit, which is an industry benchmark. A competitor that needed bankruptcy protection recently has a unit cost of $ 3674.
The firm management wants to determine the optimal location for their new facility.
What would you recommend; which location is the best choice? (Analytically justify your answer for credit. Please think about you would score the locations on the quantitative cost factors – it is not a trivial task!)
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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