3. Machine Supply Co. plans to open a new branch in Houston, TX to provide local...

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3. Machine Supply Co. plans to open a new branch in Houston, TX to provide local support to its customers in the area. The company currently considers two locations (small and large) for its new branch. While the small location can store up to 500 units of product, the large one can store up to 1200 units (more than these amounts cannot be stored at any time). However, the large location costs an additional $1000 per month to rent compared to the small location. Transportation companies charge different amounts for small and large locations as provided in the table below. The expected demand in the greater Houston area is 52000 units and each unit costs $300. The inventory holding rate per year is 24%. Given the below information about two locations and transportation company. Which branch location should be chosen by Machine Supply CO.? NOTE: It is expected that the average inventory level in Memphis, TN (the source facility) will not be affected by these decisions. If you need any additional information, please note down your assumptions. (20 Points) Name Small Large Fixed Transportation Cost per Delivery $500 $950 In-Transit Time (days) 3 2 3. Machine Supply Co. plans to open a new branch in Houston, TX to provide local support to its customers in the area. The company currently considers two locations (small and large) for its new branch. While the small location can store up to 500 units of product, the large one can store up to 1200 units (more than these amounts cannot be stored at any time). However, the large location costs an additional $1000 per month to rent compared to the small location. Transportation companies charge different amounts for small and large locations as provided in the table below. The expected demand in the greater Houston area is 52000 units and each unit costs $300. The inventory holding rate per year is 24%. Given the below information about two locations and transportation company. Which branch location should be chosen by Machine Supply CO.? NOTE: It is expected that the average inventory level in Memphis, TN (the source facility) will not be affected by these decisions. If you need any additional information, please note down your assumptions. (20 Points) Name Small Large Fixed Transportation Cost per Delivery $500 $950 In-Transit Time (days) 3 2

Answer rating: 100% (QA)

To determine which branch location Machine Supply Co should choose we need to compare the total costs associated with each location Lets calculate the total costs for each location 1 Small Location Rent cost 0 Assuming no additional cost mentioned Transportation cost per unit 500 Transportation time 3 days Holding cost per unit per year 24 of 300 unit cost 72 Total units needed to meet demand 52000 units Total transportation cost 500 52000 units 26000000 Total holding cost 72 52000 units 3744000 Total cost 26000000 3744000 29744000 2 Large Location Rent cost 1000 per month Transportation cost per unit 950 Transportation time 2 days Holding cost per unit per year 72 Total units needed to meet demand 52000 units Total transportation cost 950 52000 units 49400000 Total holding cost 72 52000 units 3744000 Total rent cost 1000 12 months 12000 Total cost 49400000 3744000 12000 53156000 Based on the calculations the total cost ... View the full answer