Chapter 6 -- Supply Chain Design ABC Manufacturing plans to build a new facility in the southwest part of the US. In hopes of bolstering their local economy, that states of Arizona, New Mexico, and Utah have submitted proposal that include tax cuts, infrastructure improvements, and miscellaneous benefits. Prior to determining where to build its newest factory, however, the company must analyze overall costs based upon cost of materials, labor, and other factors. it is your responsibility to calculate the overall cost of production in each state. Use the following information to determine which location offers the overall best opportunity for profit. Arizona Fixed Costs Direct Material cost/unit Direct Labor cost/unit Overhead/unit Transportation cost/unit New Mexico 135,285 12.45 23.00 95 1.12 143,236 11.75 22.40 195 1.00 Utah 138, 189 12.00 22.60 1.01 1019 1. ABC projects a total production of 30,000 units in year one, and 45,000 each year thereafter which location offers the best opportunity based upon overall cost? As you are calculating overall annual costs/unit for each location, a colleague determines which states overall benefits package is most advantageous. Here is what she determines. New Mexico 987,000 Arizona 1,000,000 Utah 993,000 Total Annual Concessions 2. Calculate the reduction in cost/unit. Does this alter your original decision as to which location is best? Location Analysis Enter data only in yellow cells. The template is designed for up to 5 locations. 17 Data New Mexico Arizona Utah 5 Fixed Costs 6 Direct material cost/unit Direct labor cost/unit 8 Overhead/unit 9 Transportation cost/unit 10 11 Annual Production 12 13 Total Costs New Mexico Arizona Utah 14 Fixed Costs $0.00 $0.00 15 Direct material cost $0.00 $0.00 16 Direct labor cost $0.00 $0.00 Overhead $0.00 $0.00 18 Transportation cost $0.00 $0.00 19 Total $0.00 $0.00 20 21 Least-cost location Location1 22 23 24 Data New Mexico Arizona Utah 25 State Conces ons 26 27 Annual Production 28 29 Reduction in Cost/unit #DIV/01 #DIV/0! #DIV/01 30 32 Data New Mexico Arizona Utah 32 Total cost (from above) 33 Net Cost 34 35 36 37 38 39 Location Analysis