Problem 1 -
Ching-Chang Kuo is considering opening a new foundry in Denton, Texas; Edwardsville, Illinois; or Fayetteville, Arkansas, to produce high quality rifle sights. He has assembled the following fixed-cost and variable-cost data:
|
|
PER-UNIT COSTS
|
|
LOCATION
|
FIXED COST PER YEAR
|
MATERIAL
|
VARIABLE LABOR
|
OVERHEAD
|
|
Denton
|
$200,000
|
$.20
|
$.40
|
$.40
|
|
Edwardsville
|
$180,000
|
$.25
|
$.75
|
$.75
|
|
Fayetteville
|
$170,000
|
$1.00
|
$1.00
|
$1.00
|
a) Graph the total cost lines.
b) Over what range of annual volume is each facility going to have a competitive advantage?
c) What is the volume at the intersection of the Edwardsville and Fayetteville cost lines?
Problem 2 -
Room registrations in the Toronto Towers Plaza Hotel have been recorded for the last 9 years. To project future occupancy, management would like to determine the mathematical trend of guest registration. This estimate will help the hotel determine whether future expansion will be needed. Given the following time-series data, develop a regression equation relating registrations to time (e.g., a trend equation). Then forecast year 11 registrations. Room registrations are in the thousands:
|
Year 1: 17
|
Year 2: 16
|
Year 3: 16
|
Year 4: 21
|
Year 5: 20
|
|
Year 6: 20
|
Year 7: 23
|
Year 8:25
|
Year 9: 24
|
|