CH 6 MGMT 383

Assume a fixed cost for a process of $120,000. The variable cost to produce each unit of product is $35, and the selling price for the finished product is $50. Which of the following is the number of units that has to be produced and sold to break-even?

$50 - $35 = $15. $120,000/$15 = 8,000 units.

The formats by which a facility is arranged are defined by the general pattern of work flow; there are five basic structures

(project, workcenter, manufacturing cell, assembly line, and continuous process).

One trade-off illustrated by the product-process matrix is between flexibility and cost. To produce nonstandard products at relatively low volumes

, work centers (flexible) should be used. A highly standardized product (low-cost commodity) produced at high volumes should be produced using an assembly line or a continuous process.

Workcenter layouts allocate dissimilar machines into cells to work on products that have dissimilar processing requirements.

A workcenter layout, sometimes referred to as a job shop, is where similar equipment or functions are grouped together.

Assume a fixed cost for a process of $100,000. The variable cost to produce each unit of product is $10, and the selling price for the finished product is $50. Ignoring inventory, how many units must the firm sell to break-even?

Contribution margin per unit = $50 - $10 = $40. Break even = $100,000/$40 = 2,500.

In a workcenter, machine A has a ten minute set-up time per batch and a two minute per unit run time. Machine B performs the identical function but has a set-up time of thirty minutes and a one minute run time per unit.The workcenter makes products in batches ranging from one unit to one hundred units. Assuming capacity is not a limitation on either machine, on which batches should machine B be used?

Machine A: 10 + 2Q. Machine B: 30 + 1Q. Point of indifference is where 10 + 2Q = 30 + Q or Q = 20. Thus, batches of more than 20 units should be run on machine B.

Assume a fixed cost for a process of $15,000. The variable cost to produce each unit of product is $10 and the selling price for the finished product is $25. Which of the following is the number of units that has to be produced and sold to break-even?

Q = 15000/(25-10) = 1,000 $25 - $10 = $15. $15,000/$15 = 1,000 units.

The closer the customer is to the customer order decoupling point the longer it takes the customer to receive the product.

Selection of decoupling points is a strategic decision that determines customer lead times and can greatly impact inventory investment. The closer this point is to the customer, the quicker the customer can be served.

In a project layout,

a high degree of task ordering is common.

A continuous process is similar to

an assembly line in that production follows a predetermined sequence of steps, but the flow is continuous such as with liquids, rather than discrete.

then make it from purchased materials, parts, and components.

are make-to-order firms.

The essential issue in satisfying customers in the make-to-stock environment is to

balance the level of finished inventory against the level of service to the customer.

A standard approach to choosing among alternative processes or equipment is

breakeven analysis.

Assembling-to-order derives significant advantages from moving the customer order decoupling point from

finished goods to components.

Break-Even Analysis can be used to

help decide whether to perform a task with a special purpose machine or with a general purpose machine

A standard approach to choosing among alternative processes or equipment is breakeven analysis. (Break-even analysis) is

most suitable when processes and equipment entail a large initial investment and fixed cost, and when variable costs are reasonably proportional to the number of units produced.

The focus in the make-to-stock environment is on

providing finished goods where and when the customers want them.

A general purpose machine is less capable than a

special purpose machine in certain tasks but can perform a broader variety of tasks.

The time needed to respond to a customer order is called

the lead time.

The product-process matrix shows

the relationship between process structures and product volume and variety characteristics.

Process selection refers to

the strategic decision of selecting which kind of production processes to use to produce a product or provide a service.

Engineer-to-order firms will work with the customer to design the product, and

then make it from purchased materials, parts, and components.

A workcenter layout is

where similar equipment or functions are grouped together.

An assembly line is

where work processes are arranged according to the progressive steps by which the product is made.