Location BreakEven Analysis Method of costvolume analysis used

Location Break-Even Analysis þ Method of cost-volume analysis used for industrial locations þ Three steps in the method 1. 2. Determine fixed and variable costs for each location 3. Select location with lowest total cost for expected production volume Plot the cost for each location

Locational Break-Even Analysis Example Three locations: Selling price = $120 Expected volume = 2, 000 units City Akron Bowling Green Chicago Fixed Cost $30, 000 $60, 000 $110, 000 Variable Cost $75$180, 000 $45$150, 000 $25$160, 000 Total Cost = Fixed Cost + (Variable Cost x Volume) Total Cost

Annual cost Locational Break-Even Analysis Example – $180, 000 – – $160, 000 – $150, 000 – e – curv t s o c $130, 000 – ago c i h C – $110, 000 – n ree – G g ve – owlin t cur s $80, 000 – B co t s – co $60, 000 – ron ve – Ak cur – Akron $30, 000 – lowest – cost $10, 000 – | | | – 0 500 1, 000 Chicago lowest cost Bowling Green lowest cost | | 1, 500 2, 000 2, 500 3, 000 Volume

A farm implements dealer is seeking a fourth warehouse location to complement three existing warehouses. There are three potential locations: Charlotte, Atlanta and Columbia. Charlotte would involve a fix cost of $4, 000 per month and variable cost of $4 per unit. Atlanta would involve a fix cost of $3500 per month and variable cost of $5 per unit. Columbia would involve a fix cost of $5, 000 per month and variable cost of $6 per unit. Use of Charlotte location would increase system transportation cost by $19, 000 per month. Atlanta by $22, 000 per month and Columbia by by $18, 000 per month. Which location will result in lowest cost to handle 800 units per month

Example • • • A manufacturer of certain industrial component is interested in locating a new facility in a target market and would like to know the most appropriate place in the target market to locate the proposed facility. The manufacturer feels that there are no location constraints in the target market (i. e. any point in the target market is good enough). There are four supply points A, B, C and D in the locality that will provide key inputs to the new facility. A two-dimensional grid map of the target market in which we would like to locate a new facility with distance coordinates of the four supply points is available. The annual supply from these four points to the proposed facility is 200, 450, 175 and 150 tonnes respectively. The situation is graphically shown in the two-dimensional plot in the figure. While the coordinates in the parentheses show the distance from the origin of the target map of each of the supply point, the number that follows is the annual shipment (in tonnes) from these points to the proposed facility. Identify the most appropriate point in the grid map to locate the new facility.

Assignment-1 Blue Star is one of India's largest central air conditioning and commercial refrigeration company. It has many state –of –the art manufacturing facilities. To view these facilities, go to the webpage http: //www. bluestarindia. com/index. asp and click on Manufacturing on the top menu bar. You can then click on Manufacturing Facilities, and choose the facilities you want to view. A. Location issues play a very important role in setting up a manufacturing plant, Can you analyze why the plants have been setup at these places on account of availability of electricity, water, transport facilities etc? B. Do you think spread of potential customers about the location plays an important role in selecting the location?