Professional Documents
Culture Documents
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4. Give an example of a good and a service that exhibit these seasonal demand patterns:
a. Annual seasonality in demand for campgrounds, Christmas trees, Mothers Day cards,
snow skis, lawn and garden equipment, snow tires.
b. Monthly seasonal patterns are often created by welfare and social security checks being
sent out and deposited in banks or increased spending, demand for examinations and
registrations at motor vehicle bureaus, subscription renewals and delinquent payment
notices.
c. Weekly seasonal patterns can be noted in motor vehicle traffic, hotel registrations,
supermarket traffic, telephone calls, and demand for auto repair.
d. Daily patterns can be noted in restaurants, telephone calls, motor vehicle traffic,
supermarket traffic, and so on.
5. Give some examples of building flexibility into system design:
Examples of built-in flexibility include buying more land than is currently needed, building
larger plants/offices/homes than currently needed, designing facilities in such a way that future
expansion will require minimal cost and effort (e.g., electrical, plumbing hookups), room for
expanded parking, and so on.
7. What is meant by Capacity in chunks, and shy is that a factor in capacity palnning?
Capacity in chunks refers to the large stepwise increases that are frequently encountered
in capacity decisions. An example would be adding a new machine. It is important
because it means that small capacity increases may not be feasible, or that other
alternatives (e.g., working overtime instead of buying another machine) may be worthy of
consideration.
10. How do capacity decisions influence productivity?
Capacity designs establish constraints within which operations must function. They offer an
opportunity to achieve productivity improvements if done carefully. However, mistakes here
can hamper future productivity improvements because poor design can be very difficult to
overcome.
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11.
12.
13.
Discuss the importance of capacity planning in deciding on the number of police officers or
fire trucks to have on duty at a given time.
Capacity of government, not-for-profit service operations such as the number of police
officers, the number of firefighters and the number of emergency vehicles is somewhat
different than the capacity of manufacturing or other types of service operations. In the above
listed not-for-profit service areas, the service need is immediate (i.e., fire, emergency, crime,
weekend, Thanksgiving or Christmas travel) and cannot be delayed or deferred to a later
period. However, in many cases involving manufacturing operations, in the absence of
sufficient capacity, it may be possible to delay production to a later period as long as
backorders are allowed. Therefore, in the above-mentioned cases, the decision-maker may
want to provide additional capacity since the consequences of having inadequate capacity can
be disastrous.
5-3
17.
a.
b.
Utilizatio n
Actualoutput
7
70 %
Design capacity 10
Efficiency
Actualoutput
7
87 .5%
Effective capacity 8
Utilizatio n
Actualoutput
4
67 %
Design capacity 6
Efficiency
Actualoutput
4
80 %
Effective capacity 5
c. This is not necessarily true. If the design capacity is relatively high, the utilization could
be low even though the efficiency was high.
3.
FC = $9,200/month
VC = $ .70/unit
Rev = $ .90/unit
FC
$9,200
46,000 units
Rev VC $. 90 $. 70
b. Profit = Rev x Q (FC + VC x Q)
1. P61,000 = $.90(61,000) [$9,200 + $.70(61,000)] = $3,000
2. P87,000 = $.90(87,000) [$9,200 + $.70(87,000)] = $8,200
a.
Q BEP
c.
Total Revenue
$23,000
25,556 units
R
$. 90 / unit
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e.
$100,000
TR
TC
Cost
$50,000
$9,200
0
Volume
(units)
1.
5.
Demand = 30,000 = Q
FC = $25,000
VC = $.37/pen
a. Rev = $1.00/pen
FC
$25,000
39,683 units
Rev VC $1.00 $. 37
b. specified profit = $15,000
Q BEP
30,000
Rev VC
Rev $. 37 / unit
Solving for Rev: Rev = $1.71 [rounded up]
Q
7.
Source
Process A
FC
$160,000
VC
$5
TC
160,000 + 5Q
Process B
190,000
190,000 + 4Q
7Q
Vendor
Answer:
For Q less than 63,333, the total cost is less for Vendor.
For larger quantities, Process B is better.
BEP: 7Q = 190,000 + 4Q; Q = 63,333
5-5
100,000
Cost ($000)
500
400
300
200
Vendor
100
0
10
20
30
40
50
60
70
80
Q (x1000)
8.
Source
Internal 1
FC
$200,000
VC
$17
Internal 2
240,000
14
Vendor A
20 up to 30,000 units
Vendor B
Vendor C
a.
Vend A
20(10,000) = $200,000
$20(20,000) = $400,000
Vend B
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b.
Range
1 to 999
1,000 to 59,999
60,000 or more
Optimal Choice
A @ $20 each
B @ $18 each
Int. 2 @ $14 each + 240,000
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