Concept explainers
(a)
Interpretation: The annual capacity with a single eight hour shift is to be calculated.
Concept Introduction:
The annual capacityis the maximum level of output that a company is able to make a product or provide a service in a year.
Output per day is calculated by,
The capacity is given by,
(a)
Explanation of Solution
Given information:
Fixed cost for one shift is $60,000.
Unit variable cost is $7.
Selling price is $12.
Number of machines is 6.
Number of working days in year is 340.
Processing time per unit is 40 minutes.
The annual capacity with a single eight hour shift calculation is shown below:
The capacity is calculated as follows:
Thus, the capacity of plant is 24480 units per year.
(b)
Interpretation: The capacity with two shifts is to be calculated.
Concept Introduction:
The annual capacityis the maximum level of output that a company is able to make a product or provide a service in a year.
The formula to calculate the output per day is given by,
(b)
Explanation of Solution
The annual capacity with a single eight hour shift is calculated as shown below:
Determine the capacity as follows.
Thus, the capacity of plant is 48960 unit per year.
(c)
Interpretation: The break-even volume with a single shift operation is to be calculated.
Concept Introduction:
Break-even point is the no profit no loss situation.
Breakevenvolumeis the amount of product that needs to be produced and sold to cover total costs of production.
(c)
Explanation of Solution
Calculate the break-even volume with one shiftas shown below.
Thus, the break-even volume with one shift is $12000 units.
(d)
Interpretation: The maximum revenue with a single shift is to be calculated.
Concept Introduction:
Revenueis defined as the income of a company that is generated from its normal business activities, such as the sale of goods and services to customers.
(d)
Explanation of Solution
The maximum revenue per shift is calculated by using the following formula:
Thus, the revenue is $297,600 units.
(e)
Interpretation: The break-even volume with a two shift operation is to be calculated.
Concept Introduction:
Break-even point is the no profit, no loss situation.
Breakevenvolumeis the amount of product that needs to be produced and sold to cover total costs of production.
(e)
Explanation of Solution
Thus, the break-even volume with two shifts is $24,000 units.
Want to see more full solutions like this?
Chapter 10 Solutions
OM (with OM Online, 1 term (6 months) Printed Access Card)
- A company has a factory that is designed so that it is most efi cient (average unit cost is minimized) when producing 15,000 units of output each month. However, it has an absolute maximum output capability of 17,250 units per month, and can produce as little as 7,000 units per month without corporate headquarters shifting production to another plant. If the factory produces 10,925 units in October, what is the capacity utilization rate in October for this factory?arrow_forwardCharles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by 5555% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only production change that will be made in order to meet the increased demand. The bakery currently makes 1,800 loaves per month. Employees are paid $8 per hour. In addition to the labor cost, Charles also has a constant utility cost per month of $800 and a per loaf ingredient cost of $0.35 Current multifactor productivity for 640 work hours per month =0.27loaves/dollar (round your response to three decimal places).arrow_forwardWhat do you understand by capacity planning? Explain the decision tree modeling for capacity expansionarrow_forward
- Given the following data for Albert’s fabricating production area:Fixed costs for one shift = $60,000Unit variable cost = $7Selling price = $12Number of machines = 6Number of working days in year = 340Processing time per unit = 40 minutes1. What is the maximum revenue with a single shift?2. What is the break-even volume with a two-shift operation?arrow_forwardQ SJ Bakery has a facility for making cream rolls. Determine the design capacity, utilization and efficiency for this plant, given that Last week the unit produced 148,000 rolls. The effective capacity is 175,000 rolls. The production line operates 7 days per week with three 8 hour shifts per day. The line was designed to make rolls at the rate of 1200 per hour.arrow_forwardGive an example of capacity requirement planningarrow_forward
- Jose Martinez of El Paso has developed a polished stainless steel tortilla machine that makes it a "showpiece" for display in Mexican restaurants. His forecast of capacity and demand follows: Demand Capacity Regular time Overtime 1 140 140 20 2 170 150 40 Month 3 130 150 20 Costs Regular-time cost per unit Overtime cost per unit Subcontract cost per unit Inventory holding cost per unit per month 4 230 Subcontracting: 90 units available over the 5-month period Beginning inventory: 0 units Ending inventory required: 10 units Assume that backorders are not permitted. Using the transportation method, the total cost of the optimal plan is $ (enter your response as a whole number). 150 20 $90 $115 $128 $4 5 240 160 20arrow_forwardCharles Lackey operates a bakery in Idaho Fals, Idaho. Because of its excellent product and excelent location, demand has inoreased by 25% in the last year. On far boo many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a statf meeting, one employee suggested ways to load the ovens differently eo that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only production change that will be made in order to meet the increased demand. The bakery currently makes 1,500 loaves per month, Employees are paid S8 per hour. In addtion to the labor cost. Charles also has a constant utity cost per month of $850 and a per loaf ingredient cost of $0.50 Current multtactor productivity for 640 wark hourn per month - 0223 loavesidolar (round your response to three decimal places) Ater increasing the number of…arrow_forwardA manufacturing company makes two types of water skis, a trick ski and a slalom ski. The relevant manufacturing data are given in the table. Labor-Hours per Ski Department Fabricating Finishing Answer parts (A), (B), and (C) below. Trick Ski 12 1 Slalom Ski 8 1 Maximum Labor-Hours Available per Day 480 48 (A) If the profit on a trick ski is $40 and the profit on a slalom ski is $30, how many of each type of ski should be manufactured each day to realize a maximum profit? What is the maximum profit? The maximum profit is $ The maximum occurs when trick skis and slalom skis are produced.arrow_forward
- P, Q, R, and S are four work centres in a series that belong to a manufacturing company. The figure below shows each center's individual capacity in units per day. Input Q (300) P (280) (350) (A) Determine the bottle neck centre. (B) Determine the system capacity. (C) Determine the system efficiency. RS (320) Actual Output (250)arrow_forwardCharles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by 55% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only thing to be changed. The bakery currently makes 1,800 loaves per month. The pay will be $8 per hour for employees and each employee works 160 hours per month. Charles Lackey can also improve the yield by purchasing a new blender. The new blender will mean an increase in his investment. This new blender will mean an increase in his costs of $125 per month, but he will achieve the same new output (an increase to 2,790.00) as the…arrow_forwardCharles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by 55% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only production change that will be made in order to meet the increased demand. The bakery currently makes 1,600 loaves per month. Employees are paid $ 8 per hour. In addition to the labor cost, Charles also has a constant utility cost per month of $ 850 and a per loaf ingredient cost of $ 0.35. Part 2 Current multifactor productivity for 640 work hours per month = enter your response here loaves/dollar (round…arrow_forward
- MarketingMarketingISBN:9780357033791Author:Pride, William MPublisher:South Western Educational PublishingPractical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,