BUSI 411 CHAPTER 5 Problem 5-1 Determine the utilization and the efficiency for each of these situations: a. A loan processing operation that processes an average of 7 loans per day. The operation has a design capacity of 11 loans per day and an effective capacity of 8 loans per day. (Round your answer to 1 decimal place. Omit the “%” sign in your response.) b. A furnace repair team that services an average of 2 furnaces a day if the design capacity is 10 furnaces a day and the effective capacity is 5 furnaces a day. (Round your answer to 1 decimal place. Omit the “%” sign in your response.) c. Would you say that systems that have higher efficiency ratios than other systems will always have higher utilization ratios than those other systems? This is not necessarily true Correct . If the design capacity is relatively high Correct , the utilization could be low Correct even though the efficiency was high Correct . Explanation PROBLEM 5-4 A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $38,000 for A and $31,000 for B; variable costs per unit would be $7 for A and $11 for B; and revenue per unit would be $19. a. Determine each alternative’s break-even point in units. (Round your answer to the nearest whole amount.) b. At what volume of output would the two alternatives yield the same profit? (Round your answer to the nearest whole amount.) c. If expected annual demand is 10,000 units, which alternative would yield the higher profit? Problem 5-9 A company manufactures a product using machine cells. Each cell has a design capacity of 250 units per day and an effective capacity of 230 units per day. At present, actual output averages 200 units per cell, but the manager estimates that productivity improvements soon will increase output to 230 units per day. Annual demand is currently 50,000 units. It is forecasted that within two years, annual demand will triple. How many cells should the company plan to acquire to satisfy predicted demand under these conditions? Assume that no cells currently exist. Assume 238 workdays per year. (Round up your answer to the next whole number.) Cells Problem 5-14 The following diagram shows a 4-step process that begins with Operation 1 and ends with Operation 4. The rates shown in each box represent the effective capacity of that operation. Determine the capacity of this process Problem 5-11 A manager must decide which type of machine to buy, A, B, or C. Machine costs (per individual machine) are as follows: Machine Cost A $ 60,000 B $ 50,000 C $ 60,000 ________________________________________ Product forecasts and processing times on the machines are as follows: PROCCESSING TIME PER UNIT (minutes) Product Annual Demand A B C 1 25,000 1 1 5 2 14,000 1 6 3 3 20,000 1 3 4 4 6,000 6 4 2 ________________________________________ a. Assume that only purchasing costs are being considered. Compute the total processing time required for each machine type to meet demand, how many of each machine type would be needed, and the resulting total purchasing cost for each machine type. The machines will operate 8 hours a day, 250 days a year. (Enter total processing times as whole numbers. Round up machine quantities to the next higher whole number. Compute total purchasing costs using these rounded machine quantities. Enter the resulting total purchasing cost as a whole number. Omit the “$” sign.) Total processing time in minutes per machine: A B C ________________________________________ Number of each machine needed and total purchasing cost A B C ________________________________________ b. Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating cost of $15 each, B machines have an hourly operating cost of $12 each, and C machines have an hourly operating cost of $14 each. What would be the total cost associated with each machine option, including both the initial purchasing cost and the annual operating cost incurred to satisfy demand?(Use rounded machine quantities from Part a. Do not round any other intermediate calculations. Round your final answers to the nearest whole number. Omit the “$” sign.) Total cost for each machine A B C
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