HW7

A firm sells two products. Product A sells for $100; its variable cost is $40. Product B sells for $150; its variable cost is $75. Product A accounts for 70 percent of the firm's sales, while B accounts for 30 percent. The firm's fixed costs are $1 million annually. Assume the firm operates 300 days per year. How many dollars of sales does the firm need to generate per day to break even? $1,754,386 $7,752 $5,848 $2,325,581 $3,333

$5,848

Consider the simple 3-station assembly line illustrated below, where the 2 machines at Station 1 are parallel, i.e., the product only needs to go through one of the 2 machines before proceeding to Station 2.What is the bottleneck time of this process? 38 min. 20 min. 10 min. 12 min. 6 min.

12 min.

A work system has five stations that have process times of 5, 9, 14, 9, and 8. What is the bottleneck time? 35 14 18 9 45

14

An assembly line has 10 stations with times of 1, 2, 3, 4, ..., 10, respectively. What is the bottleneck time? 550% of the throughput time 100% of the throughput time 50% of the throughput time 18.18% of the throughput time 1.82% of the throughput time

18.18% of the throughput time

Explain the importance of a bottleneck operation in a production sequence.

A bottleneck operation in a production sequence is important because it affects the overall capacity of a system. The bottle neck will slow down the production and cause a buildup of products waiting to be processed at that step. It is important to identify these operations and work to improve them to increase the overall capacity of production.

Which of the following techniques is NOT a technique for dealing with a bottleneck? Develop alternate routings. Increase the capacity of the constraint. Schedule throughput to match the capacity of the bottleneck. Have cross-trained employees available to keep the constraint at full operation. All are techniques for dealing with bottlenecks.

All are techniques for dealing with bottlenecks.

Which of the following is one of the four principles of bottleneck management? Increasing capacity at bottleneck stations is a mirage. Increased non-bottleneck capacity is increased system capacity. Release work orders to the system at the bottleneck's capacity pace. Bottlenecks should be moved to the end of the system process. Lost time at a non-bottleneck is lost system capacity.

Release work orders to the system at the bottleneck's capacity pace.

Consider a production line with five stations. Station 1 can produce a unit in 9 minutes. Station 2 can produce a unit in 10 minutes. Station 3 has two identical machines, each of which can process a unit in 12 minutes (each unit only needs to be processed on one of the two machines). Station 4 can produce a unit in 11 minutes. Station 5 can produce a unit in 8 minutes. Which station is the bottleneck station? Station 1 Station 2 Station 3 Station 4 Station 5

Station 4

A firm produces three products. Product A sells for $50; its variable costs are $15. Product B sells for $200; its variable costs are $150. Product C sells for $25; its variable costs are $10. Last year, the firm sold 5000 units of A, 3000 units of B, and 6000 units of C. The firm has fixed costs of $220,000 per year. Calculate the break-even point in dollars for the firm.

Total revenue=$50*5,000+$200*3,000+$25*6,000=$250,000+$600,000+$150,000=$1,000,000 Contribution A=($50*5,000 units)/$1,000,000=0.25Contribution B=($200*3,000 units)/$1,000,000=0.6Contribution C=($25*6,000 units)/$1,000,000=0.15 Break-even point in dollars=($220,000)/(((1-($15/$50))*0.25) + ((1-($150/$200))*.6) + ((1-($10/$25))*0.15))=$220,000/(0.175+0.15+0.09)=$220,000/0.415=$530,120.48 per year

Which of the following statements regarding fixed costs is TRUE? Fixed costs rise by a constant amount for every added unit of volume. Fixed cost is the difference between selling price and variable cost. Fixed costs are those costs associated with direct labor and materials. Fixed costs equal variable costs at the break-even point. While fixed costs are ordinarily constant with respect to volume, they can "step" upward if volume increases result in additional fixed costs.

While fixed costs are ordinarily constant with respect to volume, they can "step" upward if volume increases result in additional fixed costs.

Which of the following costs would be incurred even if no units were produced? direct labor costs purchasing costs raw material costs building rental costs transportation costs

building rental costs

Effective capacity is the: maximum output of a system in a given period. sum of all of the organization's inputs. minimum usable capacity of a particular facility. capacity a firm expects to achieve given the current operating constraints. average output that can be achieved under ideal conditions.

capacity a firm expects to achieve given the current operating constraints.

Which of the following represents a common way to manage capacity in the service sector? changes in staffing levels reservations first-come, first-served service rule appointments "early bird" specials in restaurants

changes in staffing levels

Utilization will typically be lower than efficiency because: expected output is less than actual output. effective capacity is less than design capacity. effective capacity is greater than design capacity. expected output is less than rated capacity. effective capacity equals design capacity.

effective capacity is less than design capacity.

Effective capacity × Efficiency equals: efficient capacity. design capacity. actual capacity. expected output. utilization.

expected output.

Which of the following represents an aggressive approach to demand management in the service sector when demand and capacity are not particularly well matched? reservations appointments first-come, first-served rule lower resort hotel room prices on Wednesdays none of these

lower resort hotel room prices on Wednesdays

In "drum, buffer, rope," what provides the synchronization or communication, i.e., signals between workstations? rope drum buffer all three of these in combination none of these

rope

Break-even analysis can be used by a firm that produces more than one product, but: the break-even point depends upon the proportion of sales generated by each of the products. the firm must allocate some fixed cost to each of the products. each product has its own break-even point. the results are estimates, not exact values. None of these statements is true.

the break-even point depends upon the proportion of sales generated by each of the products.

Break-even is the number of units at which: total revenue equals total cost. total revenue equals total variable cost. total revenue equals total fixed cost. total revenue equals price times quantity. total profit equals total cost.

total revenue equals total cost.

Basic break-even analysis typically assumes that: both costs and revenues are made up of fixed and variable portions. costs increase in direct proportion to the volume of production, while revenues increase at a decreasing rate as production volume increases because of the need to give quantity discounts. revenues increase in direct proportion to the volume of production, while costs increase at a decreasing rate as production volume increases. variable costs and revenues increase in direct proportion to the volume of production. All of these are assumptions in the basic break-even model.

variable costs and revenues increase in direct proportion to the volume of production.

A product sells for $5, and has unit variable costs of $3. This product accounts for $20,000 in annual sales, out of the firm's total of $60,000. When performing multiproduct break-even analysis, what is the weighted contribution of this product? 0.333 $1.667 0.667 0.133 0.40

0.133

Fabricators, Inc. wants to increase capacity by adding a new machine. The fixed costs for machine A are $90,000, and its variable cost is $15 per unit. The revenue is $23 per unit. What is the break-even point for machine A? $90,000 15,000 units 11,250 units 3,193 units $11,250

11,250 units

A work system has five stations that have process times of 5, 9, 4, 6, and 8. What is the throughput time of the system? 7 18 32 9 35

32

Consider the assembly line below. The three fabrication operations run in parallel, such that each batch of 20 units only needs to go through one of the three fabrication operations. After that, each batch needs to go through both assembly operations, which occur simultaneously (specifically, 10 components are made for each unit in the fabrication stage—some components are then assembled in the Assembly 1 area while others are assembled in the Assembly 2 area). The units are packaged and made ready for shipment in the final stage.What is the throughput time per batch of this operation? 33 min. 34 min. 88 min. 8 min. 40 min.

34 min

A bread-making factory has the production process shown in the figure below. There are five operations in sequence. The product only needs to go through one of the parallel machines in each case where parallel machines exist. What is the bottleneck time per batch of this process? 30 min. 60 min. 35 min. 20 min. 50 min.

35 min.

The Academic Computing Center has five trainers available in its computer labs to provide training sessions to students. Assume that the design capacity of the system is 1900 students per semester and that effective capacity equals 90% of design capacity. If the number of students who actually got their orientation session is 1500, what is the utilization of the system? 78.9% 87.7% 90% 1350 students 1710 students

78.9%

The staff training center at a large regional hospital provides training sessions in CPR to all employees. Assume that the capacity of this training system was designed to be 1200 employees per year. Since the training center was first put into use, the program has become more complex, so that 950 now represents the most employees that can be trained per year. In the past year, 850 employees were trained. The efficiency of this system is approximately ________ and its utilization is approximately ________. 87.5 percent; 950 employees 950 employees; 850 employees 89.5 percent; 70.8 percent 90.5 percent; 79.2 percent 79.2 percent; 90.5 percent

89.5 percent; 70.8 percent

A bread-making factory has the production process shown in the figure below. There are five operations in sequence. The product only needs to go through one of the parallel machines in each case where parallel machines exist. Assume 8 hours per day, 7 days per week, what is the weekly capacity of the process? 56 batches 67 batches 84 batches 96 batches 112 batches

96 batches

How is break-even analysis useful in the study of the capacity decision? What limitations does this analytical tool have in this application?

It is useful because it helps to determine what capacity a production system should be at in order for a company to break even and start making a profit. If you will be unable to reach the breakeven capacity it can be more beneficial to not produce the product at all. Break-even analysis has limitations because of the assumptions we have to use. Rarely do we actually know the exact costs associated with producing a product.

A bread-making factory has the production process shown in the figure below. There are three operations (mixing, baking and packaging) in sequence, but it does not matter which oven is used. The factory is considering purchasing faster equipment to replace one of the existing operations. Which operation should be first considered? Bake, both ovens Bake, one oven only Pack Mix Both Bake and Pack should be replaced.

Mix