Name: Abhishek Shirke

Roll no: 20
Sub: Service Operations Management
Assignment no: 01
Faculty: Prof. Amal Roy

Q1) As a planner for the Company, you are given co-ordinates for 3 retail site location s A, B
and C as (50, 60), (20, 35), (160, 50) respectively. Corresponding monthly demands for these
locations are 494000, 18000, 171000 units respectively. Determine the co-ordinates of best
location of a Warehouse to the above retail stores--- applying Centroid method. (Show
detailed Calculation & represent graphically) A Project has following list of Activities along
with their required.
Solution: Given- Coordinates for 3 Retail sites location.
A (50,60)
B (20,35)
C (160,50)

Location of X-coordinate Y- Monthly ViXi ViYi

retail stores (Xi) coordinate Demands (Vi)
(Yi)
A 50 60 494000 24700000 29640000
B 20 35 18000 360000 630000
C 160 50 171000 27360000 8550000

Σ (Vi) = 683000, Σ (ViXi) = 52420000, Σ (ViYi) = 38820000

Xc = 52420000/683000 Yc = 38820000/683000 Centre of Gravity: (76.75, 56.83)
Xc = 76.75 Yc = 56.83 Best location coordinates: (76.75, 56.83)

Centre of Gravity Method (Graph)

70
A (50,60)
60 C.G. (76.67,56.83)
C (160,50)
Y-distance (KM)

50
40 B (20,35)

30
20
10
0
0 20 40 60 80 100 120 140 160 180
X-distance (KM)
Q2) Sigma Steels is planning to start a new Factory for manufacturing of Steel Utensils at any of
three locations, namely, Bokaro, Jamshedpur & Bhilai. Fixed Costs are estimated at Rs 8.15,
7.377 & 7.903 in Rs million respectively. Variable Costs are estimated at Rs 500, 580 & 490 per
Unit respectively. Factory will have capacity of 10000 Steel Utensils per year & initially it will
work at 75% capacity utilisation. Selling Price is expected to be Rs 1800 per Unit of Steel
Utensil. Find the best location & at what capacity utilisation the best location will break even.
Solution: Break-Even Analysis
Formula for computation:
𝐅𝐢𝐱𝐞𝐝 𝐂𝐨𝐬𝐭
Break-Even Volume (VBE) =
(𝐒𝐞𝐥𝐥𝐢𝐧𝐠 𝐂𝐨𝐬𝐭)−(𝐕𝐚𝐫𝐢𝐚𝐛𝐥𝐞 𝐂𝐨𝐬𝐭)

𝟖𝟏𝟓𝟎𝟎𝟎𝟎
1. VBE for Bokaro = = 6269 units
(𝟏𝟖𝟎𝟎)−(𝟓𝟎𝟎)
𝟕𝟑𝟕𝟕𝟎𝟎𝟎
2. VBE for Jamshedpur = = 5675 units
(𝟏𝟖𝟎𝟎)−(𝟓𝟎𝟎)
𝟕𝟗𝟎𝟑𝟎𝟎𝟎
3. VBE for Bhilai = = 6033 units
(𝟏𝟖𝟎𝟎)−(𝟓𝟎𝟎)

Expected demand of 10000 units with 75% capacity utilisation i.e. 75% of 10000 = 7500 units

Bokaro Jamshedpur Bhilai

Revenue 13500000 13500000 13500000
Variable Cost 3750000 4350000 3675000
Fixed Cost 8150000 7377000 7903000
Total Cost 11900000 11727000 11578000
Profit (₹) 1600000 1773000 1922000

From the calculations, the profit for Bhilai location is maximum compared to the other two
locations, Therefore Bhilai is the best location with break-even capacity of 6033 units.