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1. Problem 8-6
A firm that has recently experienced an enormous growth rate is seeking to lease a small plant in
Memphis, TN; Biloxi, MS; or Birmingham, AL. Prepare an economic analysis of the three
locations given the following information: Annual costs for building, equipment, and
administration would be $42,400 for Memphis,
$60,000 for Biloxi, and $100,000 for Birmingham. Labor and materials are expected to be $8 per
unit in Memphis, $4 per unit in Biloxi, and $5 per unit in Birmingham. The Memphis location
would increase system transportation costs by $50,000 per year, the Biloxi location by $60,000
per year, and the Birmingham location by $27,200 per year. Expected annual volume is
13,000 units.(Omit the "$" sign in your response.)
2. Problem 8-7
A retired auto mechanic hopes to open a rustproofing shop. Customers would be local
new-car dealers. Two locations are being considered, one in the center of the city and one on
the outskirts. The central city location would involve fixed monthly costs of $6,820 and labor,
materials, and transportation costs of $30
per car. The outside location would have fixed
monthly costs of $4,500 and labor, materials, and transportation costs of $40 per car. Dealer
price at either location will be $90 per car.
Which location will yield the greatest profit if monthly demand is (1) 200 cars? (2) 300
cars?
3. Problem 8-9
Location Score