Location Facilities Quiz

Chapter 08 - Location Planning and Analysis
Chapter 08
Location Planning and Analysis
True / False Questions
1. Location decisions are basically one-time decisions usually made by new organizations.
FALSE
Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
2. The fact that most types of firms are located in every section of the country suggests that in
many cases, location decisions are not overly important; one location typically is as good as
another.
FALSE
Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
3. You can't make a mistake by locating where labor costs are low.
FALSE
Difficulty: Medium
TLO: 4
Taxonomy: Knowledge
4. Advanced communications has aided globalization.

TRUE
Difficulty: Easy
TLO: 3
Taxonomy: Knowledge
8-1
5. The first step in developing location alternatives is identifying important factors.

FALSE
Difficulty: Hard
TLO: 5
Taxonomy: Knowledge
6. An example of a regional factor in location planning is the location of our markets (either
existing or potential).
TRUE
Difficulty: Easy
TLO: 4
Taxonomy: Knowledge
7. A strategy that emphasizes convenience for the customers would probably select a single
very large facility.
FALSE
Difficulty: Easy
TLO: 4
Taxonomy: Knowledge
8. For service organizations, the dominant factors in location analysis usually are market-
related.
TRUE
Difficulty: Medium
TLO: 4
Taxonomy: Knowledge
8-2
9. Global Positioning Systems (GPS) use the Center of Gravity method to establish starting
grid co-ordinates
FALSE
Difficulty: Easy
TLO: 4
Taxonomy: Knowledge
10. Labor laws are an important site-related factor.

FALSE
Difficulty: Easy
TLO: 4
Taxonomy: Knowledge
11. Web-based, retail businesses should be located near the customer to reduce their long
distance phone charges.
FALSE
Difficulty: Easy
TLO: 4
Taxonomy: Knowledge
12. For service and retail stores, a prime factor in location analysis is customer access.
TRUE
Difficulty: Medium
TLO: 4
Taxonomy: Knowledge
13. Retail businesses generally prefer locations that are not near other retailers, as this reduces
their competition.
FALSE
Difficulty: Medium
TLO: 4
Taxonomy: Knowledge
8-3
14. Technology has made communication with global operations as easy as local
communication.
FALSE
AACSB: RT
Difficulty: Easy
TLO: 3
Taxonomy: Knowledge
15. Factor rating is limited to quantitative information concerning location decisions.

FALSE
Difficulty: Hard
TLO: 5
Taxonomy: Knowledge
16. As a result of the factor rating analysis, a manager may sometimes reject all of the
alternatives under consideration when the composite scores are below the minimum threshold
value.
TRUE
Difficulty: Medium
TLO: 5
Taxonomy: Knowledge
17. The lower cost of foreign labor is often offset by lower levels of productivity.
TRUE
AACSB: MD
Difficulty: Easy
TLO: 4
Taxonomy: Knowledge
8-4
18. The center of gravity method is a location planning technique that determines a composite
score from weighted factor evaluation.
FALSE
Difficulty: Easy
TLO: 5
Taxonomy: Knowledge
19. The center of gravity method is useful in location planning for the location of a
distribution center.
TRUE
Difficulty: Easy
TLO: 5
Taxonomy: Knowledge
20. The center of gravity method of location planning is accurate only when the quantities to
be shipped to each location are equal.
FALSE
Difficulty: Medium
TLO: 5
Taxonomy: Knowledge
21. Location decisions are closely tied to an organization's strategies.

TRUE
Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
8-5
22. A "micro-factory" is a small, automated facility with a narrow product focus located near
major markets.
TRUE
Difficulty: Easy
TLO: 3
Taxonomy: Knowledge
23. One of the reasons for the importance of location decisions is its strategic importance to
the supply chains.
TRUE
AACSB: RT
Difficulty: Easy
TLO: 2
Taxonomy: Knowledge
Multiple Choice Questions
24. Nearness to raw materials would be most important to a 

A. grocery store
B. tax preparation service
C. manufacturing company
D. post office
E. hospital
Difficulty: Easy
TLO: 4
Taxonomy: Knowledge
8-6
25. A one-hour photo processing machine in a Wal-Mart store is an example of a ___.

A. micro-factory
B. downsize strategy
C. diversified strategy
D. lean production system
E. falling price strategy
Difficulty: Medium
TLO: 3
Taxonomy: Knowledge
26. Which statement best characterizes a typical search for location alternatives?
A. identify the best location choice
B. minimize cost consequences
C. maximize associated profits
D. locate near markets
E. identify acceptable locations
Difficulty: Medium
TLO: 5
Taxonomy: Knowledge
27. Which of the following is not a location option that management can consider in location
planning?
A. expand an existing facility
B. add a new location
C. relocate from one location to another
D. do nothing
E. All are possible options.
Difficulty: Medium
TLO: 3
Taxonomy: Knowledge
8-7
28. Which of the following is the last step in the procedure for making location decisions?
A. determine the evaluation criteria
B. identify important factors
C. develop location alternatives
D. evaluate alternatives and make a selection
E. request input regarding alternatives
Difficulty: Easy
TLO: 5
Taxonomy: Knowledge
29. When a location evaluation includes both quantitative and qualitative inputs, a technique
that can be used is ___.
A. Linear programming
B. Consumer surveys
C. Factor rating
D. Transportation models
E. Center of gravity methods
Difficulty: Medium
TLO: 5
Taxonomy: Knowledge
30. The center of gravity method is used to _______ travel time, distance and costs.
A. Normalize
B. Eliminate
C. Average
D. Minimize
E. Document
Difficulty: Medium
TLO: 5
Taxonomy: Knowledge
8-8
31. In location planning, the location of raw materials, the location of markets, and labor
factors are:
A. regional factors
B. community factors
C. site-related factors
D. national factors
E. minor considerations
Difficulty: Medium
TLO: 4
Taxonomy: Knowledge
32. Software systems known as GIS help in location analysis. The initials GIS stand for __.
A. Graphic Interface Systems
B. Global Integrated Software
C. Graded Information Systems
D. Geo Intensive Software
E. Geographical Information System
Difficulty: Medium
TLO: 5
Taxonomy: Knowledge
33. Facilities, personnel and operations that are located around the world are called:
A. non-domestic
B. diversified operations
C. globalization
D. worldwide presence
E. virtual organization
Difficulty: Medium
TLO: 3
Taxonomy: Knowledge
8-9
34. Some communities offer financial and other incentives to ______ new businesses.
A. Tax
B. Attract
C. Marginalize
D. Incorporate
E. Zone
Difficulty: Easy
TLO: 4
Taxonomy: Knowledge
35. Location options don't usually include:

A. expansion
B. a contract
C. adding new facilities
D. moving
E. doing nothing
Difficulty: Hard
TLO: 3
Taxonomy: Knowledge
36. Cultural differences, Customer preferences, Labor and Resources are factors relating to:
A. Regional choices
B. Site selection
C. Zoning
D. Product design
E. Foreign locations
Difficulty: Hard
TLO: 4
Taxonomy: Knowledge
8-10
37. The method for evaluating location alternatives which uses their total cost curves is:
A. cost-volume analysis
B. transportation model analysis
C. factor rating analysis
D. linear regression analysis
E. MODI analysis
Difficulty: Easy
TLO: 5
Taxonomy: Knowledge
38. The method for evaluating location alternatives which minimizes shipping costs between
multiple sending and receiving locations is:
E. MODI analysis
Difficulty: Medium
TLO: 5
Taxonomy: Knowledge
39. The method for evaluating location alternatives which uses their composite (weighted-
average) scores is:
E. MODI analysis
Difficulty: Medium
TLO: 5
Taxonomy: Knowledge
8-11
40. An approach to location analysis that can include both qualitative and quantitative
considerations is:
A. location cost-volume
B. factor rating
C. transportation model
D. expected value (net present value)
E. financial analysis
Difficulty: Medium
TLO: 5
Taxonomy: Knowledge
41. A location analysis has been narrowed down to two locations, Akron and Boston. The
main factors in the decision will be the supply of raw materials, which has a weight of .50,
transportation cost, which has a weight of .40, and labor cost, which has a weight of .10. The
scores for raw materials, transportation, and labor are for Akron 60, 80, and 70, respectively;
for Boston 70, 50, and 90, respectively. Given this information and a minimum acceptable
composite score of 75, we can say that the manager should:
A. be indifferent between these locations
B. choose Akron
C. choose Boston
D. reject both locations
E. build a plant in both cities
AACSB: AS
Difficulty: Hard
TLO: 6
Taxonomy: Application
Essay Questions
8-12
42. A manager must decide between two location alternatives, Boston and Chicago. Boston
would have annual fixed costs of $70,000, transportation costs of $60 per unit, and labor and
material costs of $200 per unit. Chicago would have annual fixed costs of $90,000,
transportation costs of $40 per unit, and labor and material costs of $170 per unit. Revenue
will be $300 per unit.
(A) Which alternative would yield the higher profit for an annual demand of 3,000 units?
(B) Would the two locations yield the same profit at a certain volume? If so, at what volume
would that be?
A) At a volume of 3,000 units, Boston's profit would be $50,000 and Chicago's profit would
be $180,000.
B) At an annual volume of 400 units, both locations would have identical losses of $54,000.
AACSB: AS
Difficulty: Medium
TLO: 6
8-13
43. A firm is trying to decide between two location alternatives, Albany and Baltimore.
Albany would result in annual fixed costs of $60,000, labor costs of $7 per unit, material costs
of $10 per unit, transportation costs of $15 per unit, and revenue per unit of $50. Baltimore
would have annual fixed costs of $80,000, labor costs of $6 per unit, material costs of $9 per
unit, transportation costs of $14 per unit, and revenue per unit of $48.
(A) At an annual volume of 9,000, which would yield the higher profit?
(B) At what annual volume would management be indifferent between the two alternatives in
terms of annual profits?
A) At an annual volume of 9,000, Albany's profit of $102,000 is higher than Baltimore's profit
of $91,000.
B) Profits for these two locations are identical at an annual volume of 20,000 units.
AACSB: AS
Difficulty: Medium
TLO: 6
44. Given the information below on scores of three location alternatives, which alternative
would you recommend? Why?
Composite scores are: A = 72, B = 69, and C = 69. If the criterion is highest composite,
choose A.
AACSB: AS
Difficulty: Medium
TLO: 6
8-14
45. Determine the center of gravity location for the destinations and shipping quantities
shown below:
AACSB: AS
Difficulty: Medium
TLO: 6
8-15
46. Determine the optimum location for a distribution center to serve the following locations.
Shipments to each location will be approximately equal.
AACSB: AS
Difficulty: Medium
TLO: 6
The Skulls, a student social organization, has two different locations under consideration for
constructing a new chapter house. Skull's president, a POM student, estimates that due to
differing land costs, utility rates, etc., both fixed and variable costs would be different for each
of the proposed sites, as follows:
8-16
47. What would be total annual costs for the Alpha Ave. location with twenty persons living
there?
A. $5,400
B. $4,000
C. $5,000
D. $7,000
E. $9,000
AACSB: AS
Difficulty: Medium
TLO: 6
48. What would be total annual costs for either location at the point of indifference?
A. $13,000
B. $13,350
C. $9,000
D. $17,000
E. $19,200
AACSB: AS
Difficulty: Medium
TLO: 6
49. If it is estimated that thirty persons will be living in this new chapter house, which
location should the Skulls select?
A. Alpha Ave.
B. Beta Blvd.
C. either Alpha Ave. or Beta Blvd.
D. reject both Alpha Ave. nor Beta Blvd.
E. become a virtual organization
AACSB: AS
Difficulty: Medium
TLO: 6
8-17
50. If it is estimated that thirty persons will be living in this new chapter house, what would
be the Skull's annual cost savings by selecting the less costly location, rather than the more
costly?
A. $0
B. $1,500
C. $200
D. $150
E. $350
AACSB: AS
Difficulty: Medium
TLO: 6
Essay Questions
51. What are total costs for site A for a quantity of 5,000 units per year?
$150,000
AACSB: AS
Difficulty: Medium
TLO: 6
8-18
52. What are total costs for site B for a quantity of 5,000 units per year?
$160,000
AACSB: AS
Difficulty: Medium
TLO: 6
53. What are total costs for site C for a quantity of 5,000 units per year?
$185,000
AACSB: AS
Difficulty: Medium
TLO: 6
54. For what quantity would you be indifferent between selecting site A or site B?
10,000 units per year
AACSB: AS
Difficulty: Medium
TLO: 6
55. For what quantity would you be indifferent between selecting site B or site C?
30,000 units per year
AACSB: AS
Difficulty: Medium
TLO: 6
8-19
56. For what range of output would you prefer site A?
1-9,999
AACSB: AS
Difficulty: Medium
TLO: 6
57. For what range of output would you prefer site B?
10,001 - 29,999
AACSB: AS
Difficulty: Medium
TLO: 6
58. For what range of output would you prefer site C?
30,001 and above
AACSB: AS
Difficulty: Medium
TLO: 6
59. Which site would you prefer for a quantity of 20,000 units per year?
AACSB: AS
Difficulty: Medium
TLO: 6
8-20
60. For the preferred site for 20,000 units per year, what would be your total costs?
$280,000
AACSB: AS
Difficulty: Medium
TLO: 6
61. For the preferred site for 20,000 units per year, what would be your cost savings compared
to each of the other two sites?
$20,000 vs. A; $10,000 vs. C
AACSB: AS
Difficulty: Medium
TLO: 6
A manufacturing firm is considering two locations for a plant to produce a new product. The
two locations have fixed and variable costs as follows:
8-21
62. At what annual output would the company be indifferent between the two locations?
A. 60,000 units
B. 15,000 units (140k - 80k) / (20 - 16)
C. 10,000 units
D. 20,000 units
E. 4,000 units
AACSB: AS
Difficulty: Medium
TLO: 6
63. What would the total annual costs be for the Phoenix location with an annual output of
10,000 units?
A. $280,000
B. $140,000
C. $220,000
D. $300,000
E. $156,000
AACSB: AS
Difficulty: Medium
TLO: 6
64. What would be the total annual costs at the point of indifference?
A. $300,000
B. $240,000
C. $380,000
D. $220,000
E. $760,000
AACSB: AS
Difficulty: Medium
TLO: 6
8-22
65. If annual demand is estimated to be 20,000 units, which location should the company
select?
A. Atlanta
B. Phoenix
C. either Atlanta or Phoenix
D. reject both Atlanta and Phoenix
E. build at both locations
AACSB: AS
Difficulty: Medium
TLO: 6
66. If the annual demand will be 20,000 units, what would be the cost advantage of the better
location?
A. $20,000
B. $460,000
C. $480,000
D. $80,000
E. $60,000
AACSB: AS
Difficulty: Medium
TLO: 6
A location analysis has been narrowed down to three locations. The critical factors, their
weights, and the ratings for each location are shown below:
8-23
67. What is the composite score for location A?

A. 76
B. 75
C. 78
D. 74
E. 76.33
AACSB: AS
Difficulty: Medium
TLO: 6
68. What is the composite score for location B?

A. 76
B. 75
C. 78
D. 74
E. 76.33
AACSB: AS
Difficulty: Medium
TLO: 6
69. What is the composite score for location C?

A. 76
B. 75
C. 78
D. 74
E. 76.33
AACSB: AS
Difficulty: Medium
TLO: 6
8-24
70. If the selection criteria is to be the greatest composite score, management should choose:
A. location A
B. location B
C. location C
D. either B or C
E. to reject all locations
AACSB: AS
Difficulty: Medium
TLO: 6
71. If the decisions rule is to select the location with the greatest composite score exceeding
80, management should choose:
A. location A
B. location B
C. location C
D. either B or C
E. to reject all locations
AACSB: AS
Difficulty: Medium
TLO: 6
A clothing manufacturer produces clothing in five locations in the U. S. In a move to vertical

integration, the company is planning a new fabric production plant that will supply fabric to
all five clothing plants. The clothing plants have been located on a coordinate system as
follows:
8-25
72. If the amount of fabric shipped to each plant is equal, what is the optimal location for the
fabric plant?
A. 5, 5
B. 6, 4
C. 4, 6
D. 6, 2
E. 5, 4
AACSB: AS
Difficulty: Medium
TLO: 6
73. Shipments of fabric to each plant vary per week as follows: plant A, 200 units; plant B,
400 units; plant C, 300 units; plant D, 300 units; and plant E, 200 units. What is the optimal
location for the fabric plant?
A. 6.2, 3.0
B. 6.0, 4.0
C. 6.5, 5.3
D. 5.6, 4.4
E. 5.0, 3.0
AACSB: AS
Difficulty: Medium
TLO: 6
A hardware distributor has regional warehouses at the locations shown below. The company
wants to locate a new central distribution center to serve this warehouse network.
8-26
74. If weekly shipments to each warehouse will be approximately equal, what is the optimal
location for the distribution center?
A. 5, 5
B. 5, 4
C. 4, 5
D. 5, 6
E. 6, 5
AACSB: AS
Difficulty: Medium
TLO: 6
75. Weekly shipments to each warehouse will be: WH1, 100; WH2, 150; WH3, 120; WH4,
150; and WH5, 120. What is the optimal location of the distribution center?
A. 5.1, 4.2
B. 5.2, 4.0
C. 5.1, 5.1
D. 4.2, 5.1
E. 4.9, 5.2
AACSB: AS
Difficulty: Medium
TLO: 6
8-27
1. Factor rating is limited to quantitative information concerning location decisions.

False
2. The factor-rating method can consider both tangible and intangible costs. True
3. Cultural differences, Customer preferences, Labor and Resources are factors relating
to: foreign locations
4. Starbucks Coffee's use of geocoded demographic and consumer data in site selection
decisions is an example of the use of a Geographic Information System or GIS. True
5. Which of the following methods best considers intangible costs related to a location
decision? Factor rating analysis
6. Manufacturers may want to locate close to their customers if the transportation of
finished goods is expensive or difficult. true
7. A strategy that emphasizes convenience for the customers would probably select a
single very large facility. False
8. Nearness to raw materials would be most important to a Manufacturing company
9. The center of gravity method is used to _____ travel time, distance and costs.
Minimize
10. One reason for a firm locating near its competitors is the presence of major resource it
needs. TRUE
11. A jewelry store is more likely than a jewelry manufacturer to consider ________ in
making a location decision. Parking and access
12. Retail businesses generally prefer locations that are not near other retailers, as this
reduces their competition. False
13. A location decision for a traditional department store (Macy's) would tend to have a(n)
Revenue focus
14. Facilities, personnel and operations that are located around the world are called:
Globalization
15. Which of the following is most likely to affect the location strategy of a manufacturing
firm? Utility costs
16. Unfavorable exchange rates can offset other savings in a location decision. True
17. For service and retail stores, a prime factor in location analysis is customer access.
True
18. Geographic information systems can assist the location decision by: combining
geography with demographic analysis
19. The lower cost of foreign labor is often offset by lower levels of productivity. True
20. Globalization of the location decision is the result of all of the following except:
higher quality of labor overseas
21. The center-of-gravity method is used primarily to determine what type of locations?
Distribution center locations
22. Which of the following statements regarding "proximity" in the location decision is
false? Clustering among fast food chains occurs because they need to be near their
labor supply.
23. The method for evaluating location alternatives which uses their composite (weighted-
average) scores is: Factor rating analysis
24. Evaluating location alternatives by comparing their composite (weighted-average)
scores involves which of the following? factor-rating analysis
25. 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 Political risk
26. Which of these assumptions is not associated with strategies for goods-producing
location decisions? High customer contact issues are critical
27. Which of the following is the last step in the procedure for making location decisions?
evaluate alternatives and make a selection
8-28
28. Which of the following is not a location option that management can consider in
location planning? All are possible
29. The location decisions of goods-producing firms will generally pay more attention to
parking access, and traffic counts than will service location decisions. False
30. An approach to location analysis that includes both quantitative and qualitative
consideration is: factor rating
31. Which of the following methods best considers intangible costs related to a location
decision? Factor rating analysis
32. As a result of the factor rating analysis, a manager may sometimes reject all of the
alternatives under consideration when the composite scores are below the minimum
threshold value. True
33. Generally, the objective of the location decision is to maximize the firm's profit. False
34. Starbucks Coffee's approach to choosing new café locations is largely based on
executive intuition, not sophisticated models and site selection technology. False
35. Globalization of the location decision is the result of all of the following except:
higher quality of labor overseas
36. Software systems known as GIS help in location analysis. The initials GIS stand for
__. Geographical Information System
37. Advanced communications has aided globalization. True
38. The center of gravity method is a location planning technique that determines a
composite score from weighted factor evaluation. False
8-29

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Chapter 08 - Location Planning and Analysis

True / False Questions

4. Advanced communications has aided globalization.

5. The first step in developing location alternatives is identifying important factors.

10. Labor laws are an important site-related factor.

15. Factor rating is limited to quantitative information concerning location decisions.

21. Location decisions are closely tied to an organization's strategies.

Multiple Choice Questions

24. Nearness to raw materials would be most important to a 

25. A one-hour photo processing machine in a Wal-Mart store is an example of a ___.

35. Location options don't usually include:

Multiple Choice Questions

10,000 units per year

30,000 units per year

56. For what range of output would you prefer site A?

57. For what range of output would you prefer site B?

58. For what range of output would you prefer site C?

30,001 and above

$20,000 vs. A; $10,000 vs. C

Multiple Choice Questions

67. What is the composite score for location A?

68. What is the composite score for location B?

69. What is the composite score for location C?

A clothing manufacturer produces clothing in five locations in the U. S. In a move to vertical

1. Factor rating is limited to quantitative information concerning location decisions.

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