1 / 8

Facility Location Part 3

Facility Location Part 3. by Anita Lee-Post. Break-even analysis. Determine the fixed and variable costs for each location. Identify the indifference point for each pair of location alternatives. Identify the ranges of output for which each location has the lowest total cost.

klingbeil
Télécharger la présentation

Facility Location Part 3

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Facility LocationPart 3 byAnita Lee-Post

  2. Break-even analysis • Determine the fixed and variable costs for each location. • Identify the indifference point for each pair of location alternatives. • Identify the ranges of output for which each location has the lowest total cost. • Select the location that gives the lowest cost for the design capacity of the new facility.

  3. Break-even analysis example C&A Electronic is considering two possible sites for its new DVD plant. The annual fixed and variable costs for each site are: If annual demand for C&A’s DVD is expected to be 25,000 units, which is the best location?

  4. Break-even analysis example continued • Determine the fixed and variable costs for each location Let Q be the demand of DVD, TC(Lexington) = 650000 + 50Q TC(Wilmore) = 350000 + 65Q

  5. Break-even analysis example continued 2. Identify the indifference points between each pair of location alternatives Let Q* be indifference demand, TC(Lexington) = TC(Wilmire) at Q* 650000 + 50Q* = 350000 + 65Q* Q* = 300000/15 = 20,000 units

  6. Break-even analysis example continued 3. Identify the ranges of output for which each location has the lowest total costs At Q = 0, TC(Lexington) = $650,000 TC(Wilmore) = $350,000  Q < 20,000, Wilmore has the lowest total cost; Q > 20,000 Lexington has the lowest total costs

  7. Break-even analysis example continued

  8. Break-even analysis example continued 4. Select the location that gives the lowest cost for the design capacity of the new facility If Q = 25,000 Q > Q* (20,000)  Lexington should be chosen as the location for the new facility

More Related