Question

Question 3

Frenzy ltd. desires to locate a new facility. Based on preliminary analysis, the choice has been reduced to four locations: A, B, C, and D. These four locations were rated on a scale from 1 (worst) to 10 (best) on each of four criteria. Each criterion was also weighted to indicate its importance (i.e., the higher the weight, the more important).The list of ratings and weights follows in the Table 3 below:

			Table 3
			Factors Score Evaluation by Location
Criterion	Weights	A	B	C	D
Wages	40	4	5	3	7
Government Policies	30	8	5	7	5
Unionisation	20	3	4	3	2
Weather	10	7	3	6	4

i. Based on weighted scores, where should Acme locate its new facility?

ii.An operations manager has narrowed down the search for a new factory to three locations. The fixed and variable cost associated with each location is given in Table 4 below.

Table 4
Location	Fixed Cost	Variable Cost
A	$100,000	$10
B	$150,000	$7
C	$200,000	$5

a.Write an equation for the total costs of each location.

b.Plot these total costs lines on a graph.

c.Over which volume of output is each location preferred based on costs?

Answer 1

i)

2)

a) and b)

A is preferred for 0 to 16666 units

B is preferred from 16667 to 25000 units

C is preferred for 25000 units and above