Super Shirt Co. plans to open a new factory and is looking for a suitable location. They have
narrowed their choice down to three locations, Lima, Peru; Rome, Italy; and Nome, Alaska.
They have defined four factors and have assigned weights to these factors as follows: wage
rates (60), construction costs (20), logistics (10), and climate (10). They then rated the three
locations for the four factors, using a scale of one to five. Their ratings are as follows:
(a) Calculate the scores for each location.
(b) According to the model which location should they choose?
2. Excelsior, Inc., makes water treatment machines for homes. These machines are referred to
as EXCELA, and Excelsior, Inc. is trying to decide whether or not to build a new plant in
Southern California. The plant will have annual fixed costs of $2,000,000 and variable costs of
$800 for each EXCELA produced. The sales price is $1,000 for each EXCELA.
Determine the break-even quantity.
(b) Marketing is certain that they will be able to sell much more than the break-even quantity in
part a. and have proposed building an even larger plant. This plant will have annual fixed costs
of $5,000,000 and variable costs of $700 for each EXCELA produced. The sales price will still
be $1,000 for each EXCELA. Determine the quantity above which the larger plant should be
built, rather than the plant in part a.
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The weighted score for each location has been found by multiplying the respective scores with the assigned weights. For example, Lima’s score was calculated using the formula...