A company is determining where it should manufacture a product weighing 1 lb. for the Chicago market with a demand of 100,000 items per year. Costs for each of four possible locations are summarized in the table below. If the company wants to minimize the total cost to supply the items to the Chicago market, where should the items be produced?
To determine the best location for manufacturing the product, we need to calculate the total cost for each location. The total cost includes material and labor cost per item, shipment cost to market, raw material shipment from source, and import duty per item. Given that the demand is 100,000 items per year, and the product weighs 1 lb per item, the total weight is 100,000 lbs or 1,000 hundred lbs (100 lb units). Therefore, the shipment costs to the market and raw material shipment costs should be multiplied by 1,000. Here are the calculations for each location: 1. Houston: Material and labor cost: 100,000 * $7 = $700,000 Shipment to market: 1,000 * $5 = $5,000 Raw material shipment: 1,000 * $0 = $0 Import duty: 100,000 * $0 = $0 Total cost: $700,000 + $5,000 + $0 + $0 = $705,000 2. Taiwan: Material and labor cost: 100,000 * $6 = $600,000 Shipment to market: 1,000 * $6 = $6,000 Raw material shipment: 1,000 * $2 = $2,000 Import duty: 100,000 * $2 = $200,000 Total cost: $600,000 + $6,000 + $2,000 + $200,000 = $808,000 3. Chicago: Material and labor cost: 100,000 * $10 = $1,000,000 Shipment to market: 1,000 * $0 = $0 Raw material shipment: 1,000 * $1 = $1,000 Import duty: 100,000 * $0 = $0 Total cost: $1,000,000 + $0 + $1,000 + $0 = $1,001,000 4. Seattle: Material and labor cost: 100,000 * $12 = $1,200,000 Shipment to market: 1,000 * $5 = $5,000 Raw material shipment: 1,000 * $1 = $1,000 Import duty: 100,000 * $0 = $0 Total cost: $1,200,000 + $5,000 + $1,000 + $0 = $1,206,000 Therefore, the least expensive option is Houston, with a total cost of $705,000.
C is the most effective.
i don't think it's C, can you explain me why?
t's A. houston = 100000*7+1000*5+ 1000*6 = 711000 taiwan = 100000*6+1000*6+1000*2+100000*2=808000 chicago = 10*100000+1000*1=1001000 seattle = 12*100000+5*1000+1*1000=1206000
it's A. houston = 100000*7+1000*5 = 705000 taiwan = 100000*6+1000*6+1000*2+100000*2=808000 chicago = 10*100000+1000*1=1001000 seattle = 12*100000+5*1000+1*1000=1206000
Correct answer is A