Assume 1.5 tons of input (i.e., rough lumber) is required to produce 1 ton of custom cabinetry. Additionally, assume the ton-mile freight rate for finished cabinetry is $0.5 whereas the ton-mile freight rate for rough lumber is $0.25. • Is cabinet mfg. weight losing or weight gaining? Briefly explain. • What explains the relatively high ton-mile shipping cost for finished cabinets? • Should a cabinet manufacturer locate next to its inputs or market? Explain with the aid of a diagram depicting procurement, distribution costs, and total transportation costs.

Assume 1.5 tons of input (i.e., rough lumber) is required to produce 1 ton of custom cabinetry. Additionally, assume the ton-mile freight rate for finished cabinetry is $0.5 whereas the ton-mile freight rate for rough lumber is $0.25. • Is cabinet mfg. weight losing or weight gaining? Briefly explain. • What explains the relatively high ton-mile shipping cost for finished cabinets? • Should a cabinet manufacturer locate next to its inputs or market? Explain with the aid of a diagram depicting procurement, distribution costs, and total transportation costs.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter3: Benefits, Costs, And Decisions

Section: Chapter Questions

Problem 3.5IP

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info in image
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