Supply Chain Exam 2 (Chapter 8)
17) A county wants to build one centrally-located processing facility to serve the county's four recycling drop-off locations. The four drop-offs have characteristics as given in the table below. What is the approximate center of gravity of these four locations? Location X-coordinate Y-coordinate Tonnage Drop-off point A 1 8 10 Drop-off point B 6 7 35 Drop-off point C 6 2 25 Drop-off point D 4 7 50 A) (4.75, 6.04) B) (17, 24) C) (33.5, 135.4) D) (6, 4.25) E) (570, 725)
Answer: A) (4.75, 6.04)
5) Which of the following statements regarding the center-of-gravity method is FALSE? A) It is designed to minimize the maximum possible travel distance to any of the locations. B) The optimal x- and y-coordinates are calculated separately. C) The optimal solution is unconstrained, so it could suggest a location in the middle of a body of water. D) The weights used are the quantity of goods moved to or from each location. E) The origin of the coordinate system and the scale used are arbitrary, just as long as the relative distances are correctly represented.
Answer: A) It is designed to minimize the maximum possible travel distance to any of the locations.
28) Which of the following is the best example of the proximity rule that, for service firms, proximity to market is the most important location factor? A) Soft drinks are bottled in many local plants, where carbonated water is added to proprietary syrups that may have been shipped long distances. B) Few people will travel out-of state for a haircut. C) Patients will travel very long distances to have their hernia surgeries performed at Shouldice Hospital. D) Furniture makers choose to locate near the source of good hardwoods, even though it means locating near other furniture manufacturers. E) Metal refiners (smelters) locate near mines to accomplish significant weight reduction near the metal's source.
Answer: B) Few people will travel out-of state for a haircut.
16) Currency risk is based on what assumption? A) Firms that do not continuously innovate will lose market share. B) Values of foreign currencies continually rise and fall in most countries. C) Changing product lines by reacting to every current trend may alienate the customer base. D) The value of one dollar today is greater than the value of one dollar to be received one year from now. E) The U.S. stock market fluctuates daily.
Answer: B) Values of foreign currencies continually rise and fall in most countries.
10) What is an approach to location analysis that includes both qualitative and quantitative considerations? A) locational cost-volume analysis B) factor-rating method C) transportation model D) center-of-gravity method E) make-or-buy analysis
Answer: B) factor-rating method
18) Globalization of the location decision is the result of all EXCEPT which of the following? A) market economics B) higher quality of labor overseas C) ease of capital flow between countries D) high differences in labor costs E) more rapid, reliable travel and shipping
Answer: B) higher quality of labor overseas
15) The reason fast food restaurants often are found in close proximity to each other is: A) they enjoy competition. B) location clustering near high traffic flows. C) low cost. D) availability of skilled labor. E) all of the above.
Answer: B) location clustering near high traffic flows.
19) The transportation model, when applied to location analysis: A) minimizes total fixed costs. B) minimizes total production and transportation costs. C) minimizes total transportation costs. D) maximizes revenues. E) minimizes the movement of goods.
Answer: B) minimizes total production and transportation costs.
17) Governmental attitudes toward issues such as private property, intellectual property, zoning, pollution, and employment stability may change over time. What is the term associated with this phenomenon? A) bureaucratic risk B) political risk C) legislative risk D) judicial risk E) democratic risk
Answer: B) political risk
4) Which of the following is NOT among the eight determinants of revenue and volume for a service firm? A) quality of management B) shipment cost of finished goods C) purchasing power of the customer-drawing area D) uniqueness of the firm's and the competitors' locations E) competition in the area
Answer: B) shipment cost of finished goods
18) Production and transportation costs are always considered in which of the following location decision methods? A) traffic counts B) transportation model C) purchasing power D) proximity of markets E) clustering
Answer: B) transportation model
16) Which of the following is most likely to affect the location strategy of a manufacturing firm? A) appearance/image of the area B) utility costs C) purchasing power of drawing area D) competition in the area E) parking availability
Answer: B) utility costs
14) A employee produces 15 parts during a shift in which he made $90. What is the labor content of the product? A) $90 B) $5 C) $6 D) $0.167 E) $1,350
Answer: C) $6
3) Which of the following statements regarding FedEx is TRUE? A) Its hub in Memphis, Tennessee, was selected because of its low cost. B) Memphis, Tennessee, is the only hub in the company's global flight network. C) FedEx believes the hub system helps reduce mishandling and delays due to better controls. D) FedEx uses a hub system in the United States, but a city-to-city network in other countries. E) Memphis is FedEx's only hub airport in the United States.
Answer: C) FedEx believes the hub system helps reduce mishandling and delays due to better controls.
15) Which of the following assumptions is NOT associated with strategies for goods-producing location decisions? A) Most major costs can be identified explicitly for each site. B) Focus on identifiable costs. C) High customer-contact issues are critical. D) Intangible costs can be evaluated. E) Location is a major determinant of cost.
Answer: C) High customer-contact issues are critical.
12) ________ and ________ are to key country success factors as ________ and ________ are to key region success factors. A) Cultural issues, location of markets; site size and cost, zoning restrictions B) Exchange rates, labor availability; site size and cost, environmental impact C) Labor cost, currency risk; land costs, proximity to customers D) Land costs, proximity to customers; labor cost, air and rail systems E) All of the above are accurate relationships.
Answer: C) Labor cost, currency risk; land costs, proximity to customers
6) Traffic counts and purchasing power analysis of drawing area are techniques associated with: A) locational cost-volume analysis. B) a manufacturing location decision. C) a retail or professional service location decision. D) the factor-rating method. E) the transportation model.
Answer: C) a retail or professional service location decision.
13) A jewelry store is more likely than a jewelry manufacturer to consider ________ in making a location decision. A) transportation costs B) cost of raw materials C) appearance/image of the location D) quality of life E) taxes
Answer: C) appearance/image of the location
13) A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs $0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.35 per unit. If annual demand is expected to be 10 million units, which plant offers the lowest total cost? A) Plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units. B) Plant B, because it is cheaper than Plant A for all volumes over 8,000,000 units. C) Plant A, because it is cheaper than Plant B for all volumes. D) Plant B, because it has the lower variable cost per unit. E) Neither Plant A nor Plant B, because the crossover point is at 10 million units.
Answer: A) Plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units.
11) Among the following choices, an operations manager might best evaluate political risk of a country by looking at which type of country ranking? A) based on competitiveness B) based on cost of doing business C) based on corruption D) based on magnitude of government social programs E) based on average duration between presidential/prime minister elections
Answer: C) based on corruption
15) A regional bookstore chain wants to build a distribution center that is centrally located for its eight retail outlets. It will most likely employ which of the following tools of analysis? A) assembly line balancing B) load-distance analysis C) center-of-gravity method D) linear programming E) locational cost-volume analysis
Answer: C) center-of-gravity method
2) Geographic information systems can assist the location decision by: A) automating center-of-gravity problems. B) computerizing factor-rating analysis. C) combining geography with demographic analysis. D) updating transportation method solutions. E) providing good Internet placement for virtual storefronts.
Answer: C) combining geography with demographic analysis.
23) When making a location decision at the region/community level, which of these would be considered? A) government rules, attitudes, stability, incentives B) cultural and economic issues C) cost and availability of utilities D) zoning restrictions E) air, rail, highway, waterway systems
Answer: C) cost and availability of utilities
14) The center-of-gravity method is used primarily to determine what type of locations? A) service locations B) manufacturing locations C) distribution center locations D) supplier locations E) call center locations
Answer: C) distribution center locations
7) Which of the following methods best considers intangible costs related to a location decision? A) crossover methods B) locational cost-volume analysis C) factor-rating method D) the transportation method E) center-of-gravity method
Answer: C) factor-rating method
11) Which of the following is most likely to affect the location decision of a service firm rather than a manufacturing firm? A) energy and utility costs B) attitude toward unions C) parking and access D) cost of shipping finished goods E) labor costs
Answer: C) parking and access
19) In location planning, environmental regulations, cost and availability of utilities, and taxes are: A) global factors. B) country factors. C) regional/community factors. D) site-related factors. E) none of the above.
Answer: C) regional/community factors.
6) A location decision for a traditional department store (e.g., Macy's) would tend to have what type of focus? A) cost focus B) labor focus C) revenue focus D) environmental focus E) education focus
Answer: C) revenue focus
9) Traffic counts and demographic analysis of drawing area are associated with: A) the center-of-gravity method. B) manufacturing location decisions. C) service location decisions. D) the transportation model. E) locational cost-volume analysis.
Answer: C) service location decisions.
25) Tangible costs include which of the following? A) climatic conditions B) availability of public transportation C) taxes D) quality and attitude of prospective employees E) zoning regulations
Answer: C) taxes
24) Which of these factors would be considered when making a location decision at the site level? A) government rules, attitudes, stability, incentives B) cultural and economic issues C) zoning regulations D) cost and availability of utilities E) proximity to raw materials and customers
Answer: C) zoning regulations
13) Which of the following workers is the most productive? A) $50 wages, 10 parts produced B) $10 wages, 1 part produced C) $30 wages, 5 parts produced D) $100 wages, 21 parts produced E) $500 wages, 100 parts produced
Answer: D) $100 wages, 21 parts produced
16) East Texas Seasonings is preparing to build one processing center to serve its four sources of seasonings. The four source locations are at coordinates shown below. Also, the volume from each source is provided. What is the center of gravity? X-coordinate Y-coordinate Volume Athens, Texas 30 30 150 Beaumont, Texas 20 10 350 Carthage, Texas 10 70 100 Denton, Texas 50 50 200 A) X = 28.125; Y = 31.25 B) X = 22000; Y = 24000 C) X = 27.5; Y = 40 D) center of gravity = 28 E) X = 25; Y = 40
Answer: A) X = 28.125; Y = 31.25
5) A location decision for an appliance manufacturer would tend to have what type of focus? A) cost focus B) focus on finding very highly skilled technicians C) revenue focus D) environmental focus E) education focus
Answer: A) cost focus
8) Evaluating location alternatives by comparing their composite (weighted-average) scores involves which of the following? A) factor-rating analysis B) cost-volume analysis C) transportation model analysis D) linear regression analysis E) crossover analysis
Answer: A) factor-rating analysis
4) Industrial location analysis typically attempts to: A) minimize costs. B) maximize sales. C) focus more on human resources. D) avoid countries with strict environmental regulations. E) ignore exchange rates and currency risks.
Answer: A) minimize costs.
12) Which of the following is a location analysis technique typically employed by a service organization? A) purchasing power analysis B) linear programming C) queuing theory D) transportation method E) locational cost-volume analysis
Answer: A) purchasing power analysis
14) Which of the following is a location analysis technique typically employed by a manufacturing organization? A) transportation method B) queuing theory C) correlation analysis and traffic counts D) simulation E) demographic analysis
Answer: A) transportation method
7) La Quinta Inns has a competitive edge over its rivals because it: A) uses regression analysis to determine which variables most influence profitability. B) has better television advertisements. C) picks larger locations than its rivals. D) builds only along interstate highways. E) consistently receives four-star ratings for its inns.
Answer: A) uses regression analysis to determine which variables most influence profitability.
12) A full-service restaurant is considering opening a new facility in a specific city. The table below shows its ratings of four factors at each of two potential sites. Factor Weight Gary Mall Belt Line Affluence of local population .20 30 30 Traffic flow .40 50 20 Parking availability .20 30 40 Growth potential .20 10 30 The score for Gary Mall is ________ and the score for Belt Line is ________. A) 120; 120 B) 22; 24 C) 18; 120 D) 34; 28 E) none of the above
Answer: D) 34; 28
10) Why is Northern Mexico used as a cluster for electronics firms? A) high traffic flows B) venture capitalists located nearby C) natural resources of land and climate D) NAFTA E) high per capita GDP
Answer: D) NAFTA
26) Intangible costs include which of the following? A) quality of prospective employees B) quality of education C) availability of public transportation D) all of the above E) none of the above
Answer: D) all of the above
20) Which of the following is usually NOT one of the top considerations in choosing a country for a facility location? A) availability of labor and labor productivity B) exchange rates C) attitude of governmental units D) zoning regulations E) location of markets
Answer: D) zoning regulations
2) FedEx chose Memphis, Tennessee, as its U.S. hub because: A) the city is in the center of the United States, geographically. B) the airport has relatively few hours of bad weather closures. C) it needed a means to reach cities to which it did not have direct flights. D) the firm believed that a hub system was superior to traditional city-to-city flight scheduling. E) All of the above are true.
Answer: E) All of the above are true.
9) A clothing chain is considering two different locations for a new retail outlet. They have identified the four factors listed in the following table as the basis for evaluation, and have assigned weights as shown. The manager has rated each location on each factor, on a 100-point basis, as shown under the respective columns for Barclay and Chester. Factor Factor Description Weight Barclay Chester 1 Average community income .40 30 20 2 Community growth potential .25 40 30 3 Availability of public transportation .15 20 20 4 Labor cost .20 10 30 What is the score for Chester? A) 10.00 B) 24.50 C) 25.75 D) 27.00 E) 100.00
Answer: B) 24.50
27) Which of the following statements regarding "proximity" in the location decision is FALSE? A) Service organizations find that proximity to market is the most critical primary location factor. B) Manufacturers want to be near customers when their product is bulky, heavy, or fragile. C) Perishability of raw materials is a good reason for manufacturers to locate near the supplier, not the customer. D) Reduction in bulk is a good reason for a manufacturer to locate near the supplier. E) Clustering among fast food chains occurs because they need to be near their labor supply.
Answer: E) Clustering among fast food chains occurs because they need to be near their labor supply.
1) What describes a system that stores and displays information that can be linked to a geographic location? A) AIS B) LOC C) GLOC D) LIS E) GIS
Answer: E) GIS
7) As described in the book Aerotropolis, nowadays location decisions worldwide are often being based on what? A) rivers B) rail hubs C) interstate highways D) ports E) airports
Answer: E) airports
5) Which of the following is among the eight determinants of revenue and volume for a service firm? A) uniqueness of the firm's and the competitors' locations B) quality of the competition C) quality of management D) purchasing power of the customer-drawing area E) all of the above
Answer: E) all of the above
10) Location analysis techniques typically employed by service organizations include: A) the factor rating method. B) the center-of-gravity method. C) purchasing power analysis of area. D) traffic counts. E) all of the above.
Answer: E) all of the above.
6) Community attitudes, zoning restrictions, and quality of labor force are likely to be considered in which of the following location decision methods? A) transportation method B) locational cost-volume analysis C) center-of-gravity method D) simulation E) factor-rating method
Answer: E) factor-rating method
21) When making a location decision at the country level, which of these would be considered? A) corporate desires B) land/construction costs C) air, rail, highway, waterway systems D) zoning restrictions E) location of markets
Answer: E) location of markets
22) Which of these factors would be considered when making a location decision at the region/community level? A) government rules, attitudes, stability, incentives B) cultural and economic issues C) zoning restrictions D) environmental impact issues E) proximity to raw materials and customers
Answer: E) proximity to raw materials and customers
8) Which of the following is NOT one of the predictive variables chosen by the profitability regression model used by La Quinta Inns? A) the price of the inn B) median income levels C) the state population per inn D) the location of nearby colleges E) the number of inns in a region
Answer: E) the number of inns in a region
11) On the crossover chart where the costs of two or more location alternatives have been plotted, the quantity at which two cost curves cross is the quantity at which: A) fixed costs are equal for two alternative locations. B) variable costs are equal for two alternative locations. C) total costs are equal for all alternative locations. D) fixed costs equal variable costs for one location. E) total costs are equal for two alternative locations.
Answer: E) total costs are equal for two alternative locations.
1) FedEx chose Memphis, Tennessee, for its central location, or "hub," primarily because of the incentives offered by the city of Memphis and the state of Tennessee.
Answer: FALSE
2) The location decisions of goods-producing firms will generally pay more attention to parking, access, and traffic counts than will service location decisions.
Answer: FALSE
3) For a location decision, labor productivity may be important in isolation, but low wage rates are a more important criterion.
Answer: FALSE
3) Location decisions of goods-producing companies often assume that costs are relatively constant for a given area; therefore, the revenue function is critical.
Answer: FALSE
3) The center-of-gravity method finds the location of a centralized facility, such as a distribution center, that will maximize the organization's revenue.
Answer: FALSE
4) The transportation model calculates an optimal shipping system between a central facility and several outlying customers.
Answer: FALSE
6) In location decisions, intangible costs are easier to measure than tangible costs.
Answer: FALSE
7) Location decisions are based on many things, including costs, revenues, incentives, attitudes, and intangibles, but not on ethical considerations.
Answer: FALSE
1) Lists have been developed that rank countries on issues such as "competitiveness" and "corruption."
Answer: TRUE
1) Service firms choose locations based, in part, on the revenue potential of a site.
Answer: TRUE
1) The graphic approach to locational cost-volume analysis displays the range of volume over which each location is preferable.
Answer: TRUE
2) The factor-rating method can consider both tangible and intangible costs.
Answer: TRUE
2) The ratio of labor cost per day to productivity, in units per day, is the labor cost per unit.
Answer: TRUE
4) Unfavorable exchange rates can offset other savings in a location decision.
Answer: TRUE
5) An example of an intangible cost, as it relates to location decisions, is the quality of education.
Answer: TRUE
8) Manufacturers may want to locate close to their customers if the transportation of finished goods is expensive or difficult.
Answer: TRUE
9) One reason for a firm locating near its competitors is the presence of a major resource it needs.
Answer: TRUE