Concept explainers
(a)
Interpretation:The measure of productivity in relation to the units of output per dollar of input during the four year period.
Concept Introduction:The key focus of operations management is to enhance the productivity of processes within firms. Productivity simply means the ratio between the inputs and the outputs of a process. Organizations strive to obtain a higher output with lesser inputs. Such a situation would ideally be called a high productivity situation. Sometimes, organizations spend enormous amounts on a specific kind of an input such as machinery. This may sometimes be considered in vain. However, although the initial cost is high, it would ultimately bring down other expenses such as labor costs in the long run.
(b)
Interpretation:Consideration on purchasing new equipment that would reduce the annual labor cost.
Concept Introduction:Productivity is the ultimate goal of operations management. It simply refers to the ratio between inputs and outputs. Businesses manage their processes in such a way that they can obtain a higher output by spending a lesser input. When inputs are lesser than outputs, it is a situation of higher productivity. There are instances where organizations incur a lot of inputs but the productivity of the same is obtained over a long period of time. The annual labor cost coming down over a number of years due to the implementation of a new machine is an example for the above.
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Check out a sample textbook solution- Mark's Ceramics spent $4000 on a new kiln last year in the belief that it would cut energy usage 25% over the old kiln. This kiln is an oven that turns "greenware" into finished pottery. Mark is concerned that the new kiln requires extra labor hours for its operation. Mark wants to check the energy savings of the new oven, and also to look over other measures of their productivity to see if the change really was beneficial. Mark has the following data to work with: Last Year This Year Production (finished units) 4000 4000 Greenware (pounds) 5000 5000 Labor (hrs) 350 375 Capital ($) 15000 19000 Energy (kWh) 3000 2600 Were the modifications beneficial?arrow_forwardSuppose that when an industrial machine ist years old, it generates revenue at the rate of R'(t) =6025-8t² rupees per year and result in cost the accumulate at the rate of C'(t)=4681+13t² rupees per year. 1. How many years is the use of machine profitable?2. What are the net earnings generated by the machine during its period of profitability?arrow_forwardZhu Manufacturing is considering the Introduction of a family of new products. Long-term demand for the product group is somewhat predictable, so the manufacturer must be concemed with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose among batch manufacturing or custom manufacturing, or she can invest in group technology, Zhu won't be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four compartments: poor, fair, good, and excellebt The table below indicates the payoffs (profits) associated with each processidemand combination, as well as the probabilities of each long-term demand level: Demand Poor Fair Good Excellent Probability Batch Custom 0.15 0.40 -$300,000 $100,000 $1,200,000 $800,000 $400,000 $00,000 0.30 $1,200,000 $750,000 $500,000 0.15 $1,300,000 $800,000 $2,200,000 Group technology a) The alternative that provides Zhu the greatest expected monetary value (EMV) is…arrow_forward
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