Question 1
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 |
Question 2
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 centre-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 centre-of-gravity method to calculate the coordinates of the best location for this mill. On the grid below, plot the location of the six farm clusters and the calculated mill location. 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 |
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