The owner of XYZ, Inc., hopes to expand the present operation by adding one new outlet.  She has studied three locations.  Each would have the same labor and materials costs (food, serving containers, napkins, etc.) of $2.50 per sandwich.  Sandwiches sell for $5 each in all locations.

Rent and equipment costs (all fixed costs) would be $5,000 per month for Location A, $5,500 for location B, and $5,800 for Location C.

Required :

i.  Determine the volume (Q) necessary for each location to realize a monthly profit of $15,000. Rounded to the nearest whole number.

ii.  If expected sales at A, B, and C are 22,000 per month, 24,000 per month, and 26,000 units per month, respectively, which location would yield the highest profits. Hint:  You would need to compute the profit for each location first before you selected the "best" location. 

 

8-2:

Using the following factor ratings, determine which location alternative (X, Y, or Z) should be chosen on the basis of maximum composite score.

                                                                                                                Location Score

Factor  (100 points each)	Weight	X	Y	Z
Convenience	0.15	80	70	60
Parking facilities	0.27	88	76	92
Display area	0.18	94	88	90
Shopper traffic	0.20	98	86	80
Operating costs	0.10	86	90	85
Neighborhood	0.10	82	83	72

                                                        

8-3:

A manager has received an analysis of several cities being considered for a new office complex. The data (10 points maximum) are as follows: 

 

                                      L O C A T I O N   S C O R E

Factor	A	B	C	D
Business services	9	5	5	8
Community services	7	6	7	4
Real Estate cost	3	9	7	5
Construction costs	5	6	8	6
Cost of living	4	7	5	7
Transportation	5	5	4	9
Taxes	6	6	8	4

REQUIRED:

a.   If the manager weights the factors equally, how would the locations stack up in terms of their composting factor rating scores (in other words, list the locations in the order (descending order) of their composite factor rating scores).

b.   Suppose that the manager weights business services and construction costs double the weights of the other factors. How would the location stack up now?