NetworkPlanning:

Your new efficient air conditioners have been successful in the North Americanmarket and now you want to spread them to South America.Your forecastspredict the following demands: the US market will buy 300,000, a 10% increasefrom last year.You predict that Mexico will buy 250,000, a 20% increase from lastyear and in Brazil you are confident you can sell 500,000.You can continue toproduceintheplantyoupurchasedintheUSoryoucansuboutmanufacturingtosub-contractorsin Mexicoor Brazil

Thevariablecosttoproducepartsineachregion.

US	$250.00 $200.00
Mexico or Brazil

You are anxious to produce at the lowest cost possible to give you the largestmargin.The US plant, which you own, can produce as much or as little as youwant.And ithasno fixedcostsbecauseyou alreadyownit.

	Mexico	Shipped fromMexico	Brazil	Shippedfrom Brazil	Shippedfrom US
Capacity	FixedCosts		FixedCosts
500,000	$2,000,000.00		$3,000,000.00
1,000,000	$3,500,000.00		$5,000,000.00
VariableTransportationCoststoshipanAirConditioner
US	$25.00		$50.00		$20.00
Mexico	$20.00	$50.00	$30.00
Brazil	$50.00	$20.00	$50.00

1. Considering only production costs (fixed and variable costs) where woulddecideto dothe bulk ofyour production?

A. ProduceintheUS

B. ProduceinBrazil

C. ProduceinMexico

D. Noneoftheabove

2. Consideringonlyproductioncostswhatwouldbethelowestpossibleproductioncosts?

A.$262,500,000

B.217,500,000

C.217,000,000

D.215,000,000

E.216,000,000

F.216,500,000

G.213,500,000

H.Noneoftheabove

3. Consideringallcosts-bothproductionandtransportation -whatisthebestnetworkdesigntodelivertheairconditionerstoallcustomers?

A. US,smallplantMexico,smallplantBrazil

B. SmallplantMexico,smallplantbrazil

C. AllUS

D. AllMexico

E. AllBrazil

F. US,largeplantMexico

G. US,largeplantBrazil

H. LargeplantMexico,smallplantBrazil

I. LargeplantBrazil,smallplantMexico

J. Noneoftheabove

4. What is the total cost to deliver the demanded air conditioners to allcustomersunder thelowest costscenario?

A.$262,500,000

B.$252,000,000

C.$251,000,000

D.$239,750,000

E.$239,000,000

F.$229,000,000

5. After you submitted the distribution plan to your boss, the companyaccountantcomestoyouandsaystheUSplantdoeshave1.5millionin

fixed costs that should be considered.How does this affect your networkdesign?

A. NoChange

B. ChangetoAllproductioninUS

C. ChangetoAllproductioninMexico

D. ChangetoAllproductioninBrazil

E. ChangetoLargeplantinBrazilandasmallplantinMexico

F. Noneoftheabove