Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
12th Edition
ISBN: 9780134741062
Author: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
Publisher: PEARSON
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Textbook Question
Chapter A, Problem 9P
The Tri-County Generation and Transmission Association is a nonprofit cooperative organization that pro vides electrical service to rural customers. Based on a faulty long-range demand
- How much will Tri-County need to charge its customers per MWh to break even next year?
- The Tri-County customers balk at that price and conserve electrical energy. Only 95 percent of fore casted demand materializes. What is the resulting surplus or loss for this nonprofit organization?
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The Tri-County Generation and Transmission Association is a nonprofit cooperative organization that provides
electrical service to rural customers. Based on a faulty long-range demand forecast, Tri-County overbuilt its
generation and distribution system. Tri-County now has much more capacity than it needs to serve its customers.
Fixed costs, mostly debt service on investment in plant and equipment, are $82.1 million per year. Variable costs,
mostly fossil fuel costs, are $22 per megawatt-hour (MWh, or million watts of power used for one hour). The new
person in charge of demand forecasting prepared a short-range forecast for use in next year's budgeting process.
That forecast calls for Tri-County customers to consume 1 million MWh of energy next year.
a. How much will Tri-County need to charge its customers per MWh to break even next year? $. (Enter your
response rounded to the nearest penny.)
Winchester Hospital is a privately owned institution. The hospital is at full capacity, but the governing board would like to see an increase in revenue. They’ve tasked you, the hospital administrator, with finding ways to accomplish this. If you are able to raise revenue, the board will provide you with a significant year-end bonus. Currently, 50% of Winchester’s rooms can be converted from having one bed to having two beds, allowing for more patients to be admitted. Doctors, nurses, and other hospital staff are firmly against this move, especially because additional hiring is not planned. These stakeholders make up the vast majority of the hospital workforce. Evaluate this situation using both the utilitarianism and individualistic (ethical egoism) approaches. Define each approach and describe how each would resolve the decision. What would you expect the outcome of each decision to be? Support your conclusions with facts from the situation.
Majestic Corporation provides call-center ordering services for Essential Oils magazine. Majestic receives an annual fee of $200,000 for providing such services and is also eligible to receive a performance bonus up to
$65,000 if the average customer wait times are below certain thresholds at the end of the year.
Using historical results as well as current expectations, Majestic estimates the chances of achieving the different performance bonuses as shown in the table here.
Assume there are NO revenue constraints, and the entity uses the expected value approach to record variable consideration when recognizing revenue during the period. Which is the amount of the performance bonus
management can recognize in the transaction price?
Average wait times Performance Bonus % Chance of Achieving
$65,000
15%
< 1 minute
< 2 minutes
< 3 minutes
< 4 minutes
< 5 minutes
$45,000
$25,000
$5,000
0
10%
50%
20%
5%
a. Management would include the variable consideration in the transaction price in the…
Chapter A Solutions
Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
Ch. A - Mary Williams, owner of Williams Products, is...Ch. A - Prob. 2PCh. A - An interactive television service that costs $10...Ch. A - A restaurant is considering adding fresh brook...Ch. A - Spartan Castings must implement a manufacturing...Ch. A - A news clipping service is considering...Ch. A - Prob. 7PCh. A - Techno Corporation is currently manufacturing an...Ch. A - The Tri-County Generation and Transmission...Ch. A - Prob. 10P
Ch. A - Tri-County G&T sells 150,000 MWh per year of...Ch. A - The Forsite Company is screening three ideas for...Ch. A - Prob. 13PCh. A - Prob. 14PCh. A - Janice Gould of Krebs Consulting is in the process...Ch. A - Build-Rite Construction has received favorable...Ch. A - Prob. 17PCh. A - Prob. 18PCh. A - Prob. 20PCh. A - Prob. 21PCh. A - Prob. 22PCh. A - Prob. 24P
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