Conestoga College

OPER 8025

CHAPTER 8

1)FedEx chose Memphis, Tennessee, as its U.S. hub because

1. the city is in the centre of the U.S., geographically.
2. the airport has relatively few hours of bad weather closures.
3. it needed a means to reach cities to which it did not have direct flights.
4. the firm believed that a hub system was superior to traditional city-to-city flight scheduling.
5. All of the above are true.

2. Which of the following statements regarding FedEx is true?

1. Its hub in Memphis, Tennessee, was selected because of its low cost.
2. Memphis, Tennessee, is the only hub in the company's global flight network.
3. FedEx believes the hub system helps reduce mishandling and delays due to better controls.
4. FedEx uses a hub system in the United States, but a city-to-city network in other countries.
5. Memphis is FedEx's only hub airport in the U.S.

3. Industrial location analysis typically attempts to

1. minimize costs.
2. maximize sales.
3. focus more on human resources.

4. avoid countries with strict environmental regulations.
5. ignore exchange rates and currency risks.

4. Which of the following statements regarding the centre-of-gravity method is false?

1. It is designed to minimize the maximum possible travel distance to any location.
2. The optimal x- and y-coordinates are calculated separately.
3. The optimal solution is unconstrained, so it could suggest a location in the middle of a body of water.
4. The weights used are the quantity of goods moved to or from each location.
5. The origin of the coordinate system and the scale used are arbitrary, just as long as the relative distances are correctly represented.

5. Why is Northern Mexico used as a cluster for electronics firms?

1. high traffic flows
2. venture capitalists located nearby
3. natural resources of land and climate
4. NAFTA
5. high per capita GDP

6. Which of the following was not a factor in determining the location of Intel's Arizona plant?

1. skilled labour availability
2. U.S. laws to protect intellectual property
3. tax breaks from local and regional government
4. proximity to Intel's California headquarters
5. lax labour laws

7. Among the following choices, an operations manager might best evaluate political risk of a country by looking at which type of country ranking?

1. based on competitiveness
2. based on cost of doing business
3. based on corruption

4. based on magnitude of government social programs
5. based on average duration between presidential/prime minister elections

8.                 and                are to key country success factors as               and                are to key region success factors.

1. Cultural issues; location of markets; site size and cost; zoning restrictions
2. Exchange rates; labour availability; site size and cost; environmental impact
3. Labour cost; currency risk; land costs; proximity to customers
4. Land costs; proximity to customers; labour cost; air and rail systems
5. Cultural issues; proximity to customers; environmental impact; zoning restrictions.

9. Which of the following workers is the most productive?

1. $50 wages, 10 parts produced
2. $10 wages, 1 part produced
3. $30 wages, 5 parts produced
4. $100 wages, 21 parts produced
5. $500 wages, 100 parts produced

10. An employee produces 15 parts during a shift in which he made $90. The labour content of the product is

A) $90.

B) $5.

C) $6.

D) $.167.

E) $60.  

11. Instead of comparing the salaries of Detroit autoworkers to foreign autoworkers to determine

if Union labour prices are the cause of Detroit's financial woes, which of the following should be used?

1. labour content per vehicle
2. labour productivity

3. total production
4. average productivity
5. salary is the best comparison

12. The reason fast food restaurants often are found in close proximity to each other is

1. they enjoy competition.
2. location clustering near high traffic flows.
3. low cost.
4. availability of skilled labour.
5. by-law requirements.

13. Currency risk is based on what assumption?

1. Firms that do not continuously innovate will lose market share.
2. Values of foreign currencies continually rise and fall in most countries.
3. Changing product lines by reacting to every current trend may alienate the customer base.
4. The value of one dollar today is greater than the value of one dollar to be received one year from now.
5. The U.S. stock market fluctuates daily.

14. Governmental attitudes toward issues such as private property, intellectual property, zoning, pollution, and employment stability may change over time. The term associated with this phenomenon is

1. bureaucratic risk.
2. political risk.
3. legislative risk.
4. judicial risk.
5. democratic risk.

15. A location decision for an appliance manufacturer would tend to have a(n)

1. cost focus.
2. focus on finding very highly skilled technicians.

3. revenue focus.
4. environmental focus.
5. education focus.

16. A location decision for a traditional department store (The Bay) would tend to have a(n)

1. cost focus.
2. labour focus.
3. revenue focus.
4. environmental focus.
5. education focus.

17. Globalization of the location decision is the result of all of the following except

1. market economics.
2. higher quality of labour overseas.
3. ease of capital flow between countries.
4. high differences in labour costs.
5. more rapid, reliable travel and shipping.

18. In location planning, environmental regulations, cost and availability of utilities, and taxes are

1. global factors.
2. country factors.
3. regional/community factors.
4. site-related factors.
5. cultural factors.

19. A manufacturing firm finds a location that has a significant cost advantage over alternatives,

but rejects that location because the educational infrastructure was insufficient to train the firm's workers in its special production technologies. The firm's action illustrates the link between

               and location.

1. innovation

2. clustering
3. tax incentives
4. globalization
5. proximity  

20. Which of the following is usually not one of the top considerations in choosing a country for a facility location?

1. availability of labour and labour productivity
2. exchange rates
3. attitude of governmental units
4. zoning regulations
5. location of markets

21. When making a location decision at the country level, which of these would be considered?

1. corporate desires
2. land/construction costs
3. air, rail, highway, waterway systems
4. zoning restrictions
5. location of markets

22. Which of these factors would be considered when making a location decision at the region/community level?

1. government rules, attitudes, stability, incentives
2. cultural and economic issues
3. zoning restrictions
4. environmental impact issues
5. proximity to raw materials and customers

23. When making a location decision at the region/community level, which of these would be considered?

1. government rules, attitudes, stability, incentives

2. cultural and economic issues
3. cost and availability of utilities
4. zoning restrictions
5. air, rail, highway, waterway systems

24. Which of these factors would be considered when making a location decision at the site level?

1. government rules, attitudes, stability, incentives
2. cultural and economic issues
3. zoning regulations
4. cost and availability of utilities
5. proximity to raw materials and customers

25. Tangible costs include which of the following?

1. climatic conditions
2. availability of public transportation
3. taxes
4. quality and attitude of prospective employees
5. zoning regulations

26. Intangible costs include all of the following except

1. quality of prospective employees.
2. quality of education.
3. availability of public transportation.
4. availability of health care.
5. entry-level training for new employees.

27. Operations managers will need to consider ethical and social responsibility issues when location decisions involve

1. child labour issues.
2. sweatshop conditions.

3. allegiance to the firm's current location.
4. corruption.
5. all of the above.

28. A firm is seeking a new factory location, and is considering several countries worldwide. In some of these countries, child labour is prevalent; in others, working conditions and worker safety are inferior to conditions in the U.S. An operations manager paying attention to                                                will factor these issues into the location decision.

1. ethical and social responsibility issues
2. key success factors
3. factor-rating systems
4. geographic information systems
5. regression models

29. Which of the following statements regarding "proximity" in the location decision is false?

1. Service organizations find that proximity to market is the most critical primary location factor.
2. Manufacturers want to be near customers when their product is bulky, heavy, or fragile.
3. Perishability of raw materials is a good reason for manufacturers to locate near the supplier, not the customer.
4. Reduction in bulk is a good reason for a manufacturer to locate near the supplier.
5. Clustering among fast food chains occurs because they need to be near their labour supply.

30. 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?

1. Soft drinks are bottled in many local plants, where carbonated water is added to proprietary syrups that may have been shipped long distances.
2. Few people will travel out of state for a haircut.
3. Patients will travel very long distances to have their hernia surgeries performed at Shouldice Hospital.
4. Furniture makers choose to locate near the source of good hardwoods, even though it means locating near other furniture manufacturers.
5. Metal refiners (smelters) locate near mines to accomplish significant weight reduction near the metal's source.

31. Which of the following worker characteristics would likely be least important for U.S. firms looking to open up call centres in different countries?

1. willing to accept low wages
2. have a high level of education
3. speak English
4. possess an in-depth knowledge of American popular culture
5. are young  

32. Community attitudes, zoning restrictions, and quality of labour force are likely to be considered in which of the following location decision methods?

1. transportation method
2. locational break-even analysis
3. centre-of-gravity method
4. simulation
5. factor-rating method

33. Which of the following methods best considers intangible costs related to a location decision?

1. crossover methods
2. locational break-even analysis
3. factor-rating analysis
4. the transportation method
5. the assignment method

34. Evaluating location alternatives by comparing their composite (weighted-average) scores involves

1. factor-rating analysis.
2. cost-volume analysis.
3. transportation model analysis.

4. linear regression analysis.
5. crossover analysis.

35. An approach to location analysis that includes both qualitative and quantitative considerations is

1. locational cost-volume.
2. factor-rating.
3. transportation model.
4. assignment method.
5. make or buy analysis.

36. 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

1. fixed costs are equal for two alternative locations.
2. variable costs are equal for two alternative locations.
3. total costs are equal for all alternative locations.
4. fixed costs equal variable costs for one location.
5. total costs are equal for two alternative locations.

37. 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) 20; 24

38. 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?

1. Plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units.
2. Plant B, because it is cheaper than Plant A for all volumes over 8,000,000 units.
3. Plant A, because it is cheaper than Plant B for all volumes.
4. Plant B, because it has the lower variable cost per unit.
5. Neither Plant A nor Plant B, because the crossover point is at 10 million units.

39. The centre-of-gravity method does not take into consideration the

1. location of markets.
2. volume of goods shipped to the markets.
3. value of the goods shipped.
4. combination of volume and distance.
5. centre-of-gravity method considers none of the above.

40. The centre-of-gravity method is used primarily to determine what type of locations?

1. service locations
2. manufacturing locations
3. distribution centre locations
4. supplier locations
5. call centre locations

41. A regional bookstore chain is about to build a distribution centre that is centrally located for its eight retail outlets. It will most likely employ which of the following tools of analysis?

1. assembly line balancing
2. load-distance analysis
3. centre-of-gravity model

4. linear programming
5. location assessment model

42. East Texas Seasonings is preparing to build one processing centre 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 centre 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

4. centre of gravity = 24000
5. centre of gravity = 28

43. 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 centre 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

44. Production and transportation costs are always considered in which of the following location decision methods?

1. traffic counts
2. transportation method
3. purchasing power
4. proximity of markets
5. clustering  

45. The transportation method, when applied to location analysis

1. minimizes total fixed costs.
2. minimizes total production and transportation costs.
3. minimizes total transportation costs.
4. maximizes revenues.
5. minimizes the movement of goods.

46. Which of the following is not among the eight determinants of revenue and volume for a service firm?

1. quality of the management
2. shipment cost of finished goods
3. purchasing power of the customer-drawing area
4. uniqueness of the firm's and the competitor's locations

5. competition in the area

47. Which of the following is not one of the eight determinants of revenue and volume for a service firm?

1. uniqueness of the firm's and the competitor's locations
2. quality of the competition
3. quality of management
4. purchasing power of the customer-drawing area
5. quality of raw materials

48. Traffic counts and purchasing power analysis of drawing area are techniques associated with

1. locational break-even analysis.
2. a manufacturing location decision.
3. a retail or professional service location decision.
4. the factor rating method.
5. the transportation method.

49. Which of the following statements regarding Starbucks Coffee is false?

1. The firm plans to open three new cafes per day around the world.
2. The firm uses GIS to evaluate every site decision.
3. The firm's cafes are exclusively in traditional settings: malls, tourist areas, and airports.
4. The firm places cafes into ever more innovative locations.
5. The firm put cafes in Japan, even though that country had no GIS data available.

50. LaQuinta Motor Inns has a competitive edge over its rivals because it

1. uses regression analysis to determine which variables most influence profitability.
2. picks better locations than its rivals.
3. picks larger locations than its rivals.

4. builds only along interstate highways.
5. shares vacancy information with suppliers.

51. Traffic counts and demographic analysis of drawing areas are associated with

1. the centre-of-gravity method.
2. manufacturing location decisions.
3. service location decisions.
4. the transportation method.
5. the competitive analysis method.

52. What describes a system that stores and displays information that can be linked to a geographic location?

1. AIS
2. LOC
3. GLOC
4. LIS
5. GIS  

53. Location analysis techniques typically employed by service organizations include all of the following except

1. factor rating method.
2. centre-of-gravity method.
3. purchasing power analysis of area.
4. traffic counts.
5. product sales analysis.

54. Which of the following is most likely to affect the location decision of a service firm rather than a manufacturing firm?

1. energy and utility costs
2. attitude toward unions
3. parking and access

4. cost of shipping finished goods
5. labour costs  

55. Which of the following is a location analysis technique typically employed by a service organization?

1. purchasing power analysis
2. linear programming
3. queuing theory
4. crossover charts
5. cost-volume analysis

56. A jewelry store is more likely than a jewelry manufacturer to consider              in making a location decision.

1. transportation costs
2. cost of raw materials
3. parking and access
4. climate
5. taxes  

57. Which of the following is a location analysis technique typically employed by a manufacturing organization?

1. transportation method
2. queuing theory
3. correlation analysis and traffic counts
4. simulation
5. demographic analysis

58. Which of these assumptions is not associated with strategies for goods-producing location

decisions?

1. Most major costs can be identified explicitly for each site.
2. Focus on identifiable cost.