Factor rating. Determine which location has the highest factor rating given the following information:
Factor
Weight
Location Scores
A
B
Labor cost
5
20
40
Material cost
3
10
30
Transportation costs
2
50
10
The Correct Answer and Explanation is :
To determine which location has the highest factor rating, we calculate the weighted score for each location based on the formula:
[
\text{Weighted Score} = \sum (\text{Factor Weight} \times \text{Location Score})
]
Step 1: Calculate Weighted Scores for Each Location
- Location A:
- Labor cost: ( 5 \times 20 = 100 )
- Material cost: ( 3 \times 10 = 30 )
- Transportation costs: ( 2 \times 50 = 100 )
- Total Weighted Score for A: ( 100 + 30 + 100 = 230 )
- Location B:
- Labor cost: ( 5 \times 40 = 200 )
- Material cost: ( 3 \times 30 = 90 )
- Transportation costs: ( 2 \times 10 = 20 )
- Total Weighted Score for B: ( 200 + 90 + 20 = 310 )
Step 2: Compare the Total Weighted Scores
- Location A: 230
- Location B: 310
Result:
Location B has the higher factor rating.
Explanation (300 Words)
Factor rating is a decision-making tool used to evaluate and compare multiple options based on weighted criteria. It is especially useful in location selection where several factors, such as labor cost, material cost, and transportation costs, need to be considered.
In this case, each factor is assigned a weight reflecting its importance (e.g., labor cost is the most critical with a weight of 5). Scores for each location (A and B) are provided for each factor, and these are multiplied by the respective weights to determine the weighted contribution of each factor to the overall score.
For Location A, the weighted contributions are calculated as ( 100 ) for labor, ( 30 ) for material, and ( 100 ) for transportation, leading to a total score of ( 230 ). For Location B, the contributions are ( 200 ), ( 90 ), and ( 20 ), respectively, resulting in a total of ( 310 ).
The higher total score of Location B indicates that it is the better choice based on the given criteria and their relative importance. This systematic approach ensures objective evaluation by incorporating both the significance of factors and their performance scores. Such methods are commonly used in site selection, supply chain management, and strategic planning to facilitate informed and rational decisions.