QUESTION $5(20$ Marks$)$

A recent study conducted by Ewert Kleynhans and Ernst Drewes, titled 'The Influence of Location on the Efficiency of Manufacturers in South Africa,$\text{'}$ highlighted the critical role of locational decisions in the manufacturing sector. The study emphasised that entrepreneurs and firms must carefully consider the location of a new plant, as well as locational decisions$$ implications for industrial development policies formulated by both government and industry stakeholders.

$5\mathrm{.}1.$ Examine the information provided below and answer the following question. INFORMATION$$NLM Enterprises $($NLME$),$ a South African manufacturing firm aiming to expand its presence in the East African regional market, is presently evaluating potential locations in Kenya, Ethiopia, Tanzania, and Uganda for the establishment of a new manufacturing plant dedicated to its East African operations. This evaluation follows an extensive preliminary assessment of all countries in East Africa.$$The management team tasked with making the decision regarding the final selection has prepared a comprehensive comparative analysis, detailed in the table below:

Average annual sectoral costs, R

South Africa

$480000012000001020000030000003500000$

As percentage of annual sectoral costs in South Africa

$$ Labour costs

Energy costs

Materials costs Transportation & logistics Taxation

REQUIRED:

Kenya Ethiopia

$30\%40\%130\%110\%30\%40\%150\%140\%90\%80\%$

Tanzania Uganda

$30\%35\%120\%90\%50\%45\%$

$120\%130\%70\%65\%$

$$Ceteris paribus, which country presents the most favourable operating cost environment for NLME? Use the table to show your analysis.

$5\mathrm{.}2.$ Use the information provided below to answer the following questions.

INFORMATION

Suppose a prominent multinational company $($MNC$)$ is contemplating the establishment of a new manufacturing facility in South Africa, intending to serve customers across the Southern African Development Community $($SADC$)$ region. The company is currently in the final stages of selecting a suitable location for the facility from three potential cities: Johannesburg, Cape Town, and Durban.

The following valid and reliable data for the three locations are available for a locational break$-$even analysis:

$(6$ marks$)$

Location

Johannesburg

Cape Town

Durban

Expected sales $($@R$2500$ per unit$)$ Total fixed manufacturing costs Direct material cost per unit

Direct labour cost per unit

Variable overhead per unit

REQUIRED:

$5000$ units R$600000$ R$400$ R$150$ R$200$

$5000$ units R$1200000$ R$200$ R$120$ R$180$

$5000$ units R$2200000$ R$130$ R$100$ R$120$

$5\mathrm{.}2\mathrm{.}1.$ Specify THREE steps that the multinational company should consider in the locational break$-$even analysis.

$5\mathrm{.}2\mathrm{.}2.$ On the basis of the data provided above, undertake a locational cost$-$volume analysis to determine the most suitable location for the MNC$$s facility in South Africa. As part of the analysis, $($a$)$ formulate the cost function for each of the three locations, $($b$)$ determine the total cost for each location for the $5000$ units of production, and $($c$)$ calculate the expected profit for each location if all the $5000$ units produced are sold at R$2500$ per unit.

QUESTION $6$

$(3$ marks$)(11$ marks$)$

$(20$ Marks$)$