Q1.

Option 1 : we shall not consider renewing the current facilities because we have already had space limitations which hamper our productivity and also the machine shop which is crowded and equipment needs to be constantly removed. Option 2: The cost of purchasing land and to build new building will be ($100,000 + (19000*40)) = $860,000 and the cost of capital is 15% bringing the total to $989,000 which is large cash outflow for the company. Option 3: States that it will cost $2,800 per month for rent plus $15,000 fixed cost for the connecting pathway. We would recommend the 3rd option because it has the least cash outflow and also the least expensive.

Q2. According to the requirements we have subjectively put the machine shop and cleaning department together as well engineering and materials mgt and the admin office together. 1 3 3 8 8 9 9

14

15

12

11

13

10

13

After calculation the load-distance and then rearrange it in descending order we have found the total Load-Distance at 820.

Then according the highest load-distance we rearranged our layout and came up with a lower loaddistance of 778. The new efficient layout is

13

12

13

14

10

15

11

Here we also put machine shop and cleaning department together, engineering and materials mgt close to administrative office. The new lower layout of LD value 778 means lower cost than prior LD value 820.