Concept explainers
a.
To determine: The values of
Introduction: From the past experiences, a big oil company can evaluate its present and the future costs. According to its study, each doubling of the size of a refinery at a single location results in the construction coststo about 68%.
b.
To determine: The best time to make additions in plant and the optimal size of each addition.
Introduction: Based on previous experiences, the oil company can easily predict the vivid picture of its present and future. Likewise, it can determine the optimal timing of plant additions and the optimal size of each addition too.
c.
To determine: The best timing to make additions in plant and the optimal size of each addition if the largest single refinery can be built with current technology is 15,000 barrels daily.
Introduction: When the major oil company installs the largest single refinery then its optimal size will not necessarily be huge while talking about the annual count. Similarly, the optimal timing of adding the plant will not necessarily be more always.
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Production and Operations Analysis, Seventh Edition
- Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.arrow_forwardYou have been hired by Kia as manager for its Pakistan operations. Assume following is the short-run production function at their assembly plant outside Karachi: Q = 10L2 – 0.5 L3 where L is variable input labor, Q is output of Cars assembled a. At the end of the year it is expected that output will double with purchase ofnew equipment and machinery. The production function is estimated to be Q = 60L.30K.70 where L is labor and K is capital. Suppose initial L1 = 1 and K1 = 1. When inputs are in increased to L2 = 2 and K2 = 2, do you observe increasing, decreasing or constant returns to scale? b. Assume Kia Head Office is considering hiring more laborers either at their Gwadar plant or alternatively at the Karachi plant. What will be your advice if workers’ marginal product is 40 at wage of Rs=5/hour in Karachi and marginal product is 28 at wage of Rs=4/hour in Gawdar?arrow_forwardA firm is manufacturing the new product. The firm expects a linear function for its revenue on the product. Their staffs, however, didn't properly consider how the cost function would vary as a function of production rate. As a result, the firm was losing money at a high production rate. Therefore, you can describe this point to most likely be: a) Past the profit limit b) before reaching the break-even point c) The point after which the total revenue equals the total cost d) a and b e) a, b and carrow_forward
- A businessman must decide whether to open a new mini grocery branch or simply extend the number of hours of its operation on its existing branch with a payoff of P 150,000. According to his friend, demand at the new location can either be low or high, which the probabilities are estimated to be 35% and 65%, respectively. If a new branch is opened and demand proves to be low, there is no need to operate on a 24-hr basis but instead, they will stick to 12-hrs operation with a payoff of P 100,000 or enhance marketing strategy through advertising. Projected response to advertising may either be favorable or not favorable, with estimated probabilities of 40% and 60%, respectively. If demand is favorable, the payoff grows to P 310,000 and if response is unfavorable, the payoff is P 120,000. The cost of advertising is P45,000. Required: a. Draw a decision tree b.Determine the expected value for each decision and event nodes.arrow_forwardA businessman must decide whether to open a new mini grocery branch or simply extend the number of hours of its operation on its existing branch with a payoff of P 150,000. According to his friend, demand at the new location can either be low or high, which the probabilities are estimated to be 35% and 65%, respectively. If a new branch is opened and demand proves to be low, there is no need to operate on a 24-hr basis but instead, they will stick to 12-hrs operation with a payoff of P 100,000 or enhance marketing strategy through advertising. Projected response to advertising may either be favorable or not favorable, with estimated probabilities of 40% and 60%, respectively. If demand is favorable, the payoff grows to P 310,000 and if response is unfavorable, the payoff is P 120,000. The cost of advertising is P45,000. Required: a. Draw a decision tree b.Determine the expected value for each decision and event nodes. Which alternative is the best…arrow_forwardA firm is considering the replacement of a machine, whose cost price is Rs 12,200 and its scrap value is Rs 200. From experience the running (maintenance and operating) costs are found to be as follows: Year 1 2 3 4 5 6 7 8 Running Cost 200 500 800 1,200 1,800 2,500 3,200 4,000 When should the machine be replaced?arrow_forward
- . A 100 cu.m. pit is to be excavated using a hydraulic excavator with a rate of 7.1 cu.m. per hour. The rental price of the hydraulic excavator is P12,600.00 per day. If the excavator is used 8 hours per day, determine the equipment cost to finish the excavation work. 18-21. The material cost of a certain scope of work has a total of P250,500.00. Determine the number of days to finish the work if they are using 3 tools that has a rental price of P760.00 per day each. Use (Labor Cost + Equipment Cost)/Material Cost = 30% Workers Salary per day P1050.00 P650.00 P480.00 P320.00 Project Engineer Foreman 2 Skilled Laborer 3 Laborerarrow_forwardA steel production plant manufactures bands and coils which sell at a profit of $25 and $30 per ton,respectively. The production rate of the plant for bands is 200 tons/hr, and that for coils is 140 tons/hr.Based on the market analysis, it has been identified that the weekly demand is at most 6000 tons and4000 tons for bands and coils, respectively . The plant operates for a maximum of 40 hours per week. 1. In Microsoft Excel, formulate a linear programming model instance for this problem, then solve. 2. Assume that the products need to be painted after manufacturing, and the painting departmentcan paint at a rate of 600 tons per hour for bands and 400 tons per hour for coils. The paintingdepartment works only for 20 hours. Update the linear programming model instance to accom-modate this requirement, and re-solve the problem. 3. The plant is planning to introduce another product “rods” to its production mix with the followingparameters:•Profit/ton = $40•Production volume = 150…arrow_forwardA relatively small privately owned coal-mining company has the sales results summarized below. Determine the annual percentage depletion for the coal mine. Assume the company's taxable income is $125,000 each year. Sales, Tons 34,300 Year Spot Sales Price, $/Ton 1 9.82 2. 50,100 11.5 71,900 11.23 50% of the Gross Depletion Allowed Year taxable Income, $ amount Depletion amount 1. 3.arrow_forward
- A building has an NOI of $130,000 and is being valued with a cap rate of 4%. Using the income approach, what is the value of the building? $4,130,000 $1,300,000 $3,250,000 $2,450,000arrow_forwardusinessman must decide whether to open a new mini grocery branch or simply extend the number of hours of its operation on its existing branch with a payoff of P 150,000. According to his friend, demand at the new location can either be low or high, which the probabilities are estimated to be 35% and 65%, respectively. If a new branch is opened and demand proves to be low, there is no need to operate on a 24-hr basis but instead, they will stick to 12-hrs operation with a payoff of P 100,000 or enhance marketing strategy through advertising. Projected response to advertising may either be favorable or not favorable, with estimated probabilities of 40% and 60%, respectively. If demand is favorable, the payoff grows to P 310,000 and if response is unfavorable, the payoff is P 120,000. The cost of advertising is P45,000. Required: a. Draw a decision treeb. Determine the expected value for each decision and event nodes.c. Which alternative is the best for the businessman?arrow_forwardA manufacturing firm has three plants and wants to find the most efficient means of meeting the requirements of its four customers. The relevant information for the plants and customers, along with shipping costs in dollars per unit, are shown in the table below: Customer (requirement) Factory (capacity) Customer 1 (25) Customer 2 (50) Customer 3 (125) Customer 4 (75) A (100) $ 15 $ 10 $ 20 $ 17 B (75) $ 20 $ 12 $ 19 $ 20 C (100) $ 22 $ 20 $ 25 $ 14 Note: This question requires Solver.Formulate the problem in Solver and find the optimal solution. What is the minimum total cost to meet all customer requirements?arrow_forward
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,