Chapter 08 – Location Planning and Analysis
1. Location decisions are basically one-time decisions usually made by new organizations.
2. The fact that most types of firms are located in every section of the country suggests that in
many cases, location decisions are not overly important; one location typically is as good as
another.
Chapter 08 – Location Planning and Analysis
3. You can’t make a mistake by locating where labor costs are low.
4. Advanced communications has aided globalization.
Chapter 08 – Location Planning and Analysis
5. The first step in developing location alternatives is identifying important factors.
6. An example of a regional factor in location planning is the location of our markets (either
existing or potential).
7. A strategy that emphasizes convenience for the customers would probably select a single
very large facility.
Chapter 08 – Location Planning and Analysis
8. For service organizations, the dominant factors in location analysis usually are market-
related.
9. Global Positioning Systems (GPS) use the Center of Gravity method to establish starting
grid co-ordinates.
10. Labor laws are an important site-related factor.
Chapter 08 – Location Planning and Analysis
11. Web-based, retail businesses should be located near the customer to reduce their long
distance phone charges.
12. For service and retail stores, a prime factor in location analysis is customer access.
13. Retail businesses generally prefer locations that are not near other retailers, as this reduces
their competition.
Chapter 08 – Location Planning and Analysis
14. Technology has made communication with global operations as easy as local
communication.
15. Factor rating is limited to quantitative information concerning location decisions.
16. As a result of the factor rating analysis, a manager may sometimes reject all of the
alternatives under consideration when the composite scores are below the minimum threshold
value.
Chapter 08 – Location Planning and Analysis
17. The lower cost of foreign labor is often offset by lower levels of productivity.
18. The center of gravity method is a location planning technique that determines a composite
score from weighted factor evaluation.
19. The center of gravity method is useful in location planning for the location of a
distribution center.
Chapter 08 – Location Planning and Analysis
20. The center of gravity method of location planning is accurate only when the quantities to
be shipped to each location are equal.
21. Location decisions are closely tied to an organization’s strategies.
22. A “micro-factory” is a small, automated facility with a narrow product focus located near
major markets.
Chapter 08 – Location Planning and Analysis
23. One of the reasons for the importance of location decisions is its strategic importance to
the supply chains.
24. Nearness to raw materials would be most important to a
Chapter 08 – Location Planning and Analysis
25. A one-hour photo processing machine in a Wal-Mart store is an example of a _________.
26. Which statement best characterizes a typical search for location alternatives?
Chapter 08 – Location Planning and Analysis
27. Which of the following is not a location option that management can consider in location
planning?
28. Which of the following is the last step in the procedure for making location decisions?
Chapter 08 – Location Planning and Analysis
29. When a location evaluation includes both quantitative and qualitative inputs, a technique
that can be used is ___________.
30. The center of gravity method is used to _______ travel time, distance and costs.
Chapter 08 – Location Planning and Analysis
31. In location planning, the location of raw materials, the location of markets, and labor
factors are:
32. Software systems known as GIS help in location analysis. The initials GIS stand for
_______.
Chapter 08 – Location Planning and Analysis
33. Facilities, personnel and operations that are located around the world are called:
34. Some communities offer financial and other incentives to ______ new businesses.
Chapter 08 – Location Planning and Analysis
35. Location options don’t usually include:
36. Cultural differences, Customer preferences, Labor and Resources are factors relating to:
Chapter 08 – Location Planning and Analysis
37. The method for evaluating location alternatives which uses their total cost curves is:
38. The method for evaluating location alternatives which minimizes shipping costs between
multiple sending and receiving locations is:
Chapter 08 – Location Planning and Analysis
39. The method for evaluating location alternatives which uses their composite (weighted-
average) scores is:
40. An approach to location analysis that can include both qualitative and quantitative
considerations is:
Chapter 08 – Location Planning and Analysis
41. A location analysis has been narrowed down to two locations, Akron and Boston. The
main factors in the decision will be the supply of raw materials, which has a weight of .50,
transportation cost, which has a weight of .40, and labor cost, which has a weight of .10. The
scores for raw materials, transportation, and labor are for Akron 60, 80, and 70, respectively;
for Boston 70, 50, and 90, respectively. Given this information and a minimum acceptable
composite score of 75, we can say that the manager should:
Chapter 08 – Location Planning and Analysis
42. A manager must decide between two location alternatives, Boston and Chicago. Boston
would have annual fixed costs of $70,000, transportation costs of $60 per unit, and labor and
material costs of $200 per unit. Chicago would have annual fixed costs of $90,000,
transportation costs of $40 per unit, and labor and material costs of $170 per unit. Revenue
will be $300 per unit.
(A) Which alternative would yield the higher profit for an annual demand of 3,000 units?
(B) Would the two locations yield the same profit at a certain volume? If so, at what volume
would that be?
Chapter 08 – Location Planning and Analysis
43. A firm is trying to decide between two location alternatives, Albany and Baltimore.
Albany would result in annual fixed costs of $60,000, labor costs of $7 per unit, material costs
of $10 per unit, transportation costs of $15 per unit, and revenue per unit of $50. Baltimore
would have annual fixed costs of $80,000, labor costs of $6 per unit, material costs of $9 per
unit, transportation costs of $14 per unit, and revenue per unit of $48.
(A) At an annual volume of 9,000, which would yield the higher profit?
(B) At what annual volume would management be indifferent between the two alternatives in
terms of annual profits?