COB 300 C - The Operations Dimension Capacity Homework

Problem 2, Chapter 5 A. BEP = FC/(SP-VC) BEPa = $40, 000/($15 -$10) = 8000 units BEPb = $30, 000/($16 -$12) = 7500 units B. Same Profit? 5 X-40, 000=4 X-30, 000. X=10, 000 units

Problem 2, Chapter 5 (cont’d) C. Demand = 12, 000 5(12, 000) – 40, 000 = $20, 000 (alt. A profit) 4(12, 000) – 30, 000 = $18, 000 (alt. B profit)

Problem 9, Chapter 5 Given: 10 hrs. or 600 min. of operating time per day. 250 days x 600 min. = 150, 000 min. per year operating time. Total processing time by machine Product A B C 1 48, 000 64, 000 32, 000 2 48, 000 36, 000 3 30, 000 36, 000 24, 000 4 60, 000 30, 000 Total 186, 000 208, 000 122, 000 You would have to buy two "A" machines at a total cost of $80, 000, or two "B" machines at a total cost of $60, 000, or one "c" machine at $80, 000.

Problem 10, Chapter 5 10. Total cost for machine A: 186, 000 min 60 = 3, 100 hrs. x $10 = $31, 000 + $80, 000 = $111, 000 Total cost for machine B: 208, 000 min 60 = 3, 466. 67 hrs. x $11 = $38, 133 + $60, 000 = $98, 133 Total cost for machine B: 122, 000 min 60 = 2, 033. 33 hrs. x $12 = $24, 400 + $80, 000 = $104, 400

SP 1. O’Hara Software Company is considering expanding its networking portion of the business. Presently, the company has three networking staff members working at corporate headquarters. O’Hara is examining two options. The first would involve adding six new staff members and building a new facility at the present site. The annual cost of this option, including personnel, is $500, 000. The second option involves adding twelve new staff members and building a larger facility at a new location. The annual cost of this option, including personnel, is $1, 200, 000. O’Hara is looking at the profit potential over the next five years. Management estimates that the present staff can handle up to $2, 000 in sales over the five-year period, that six additional staff positions allow it to handle up to $6, 000, and that twelve additional staff positions allow it to handle up to $10, 000. What do you recommend. Anticipated Demand Over Five Years 2, 000 4, 000 6, 000 8, 000 10, 000 Probability . 15 . 25 . 10

Supplement # 5 (page 211)

Problem # 12 (page 214) A firm that plans to expand its product line must decide whether to build a small or a large facility to produce the new products. If it builds a small facility and demand is low, the net present value after deducting for building costs will be $400, 000. If demand is high, the firm can either maintain the small facility or expand it. Expansion would have a net present value of $450, 000, and maintaining the small facility would have a net present value of $50, 000. If a large facility is built and demand is high, the estimated net present value is $800, 000. If demand turns out to be low, the net present value will be negative $10, 000. The probability that demand will be high is estimated to be. 60, and the probability of low demand is estimated to be. 40. Analyze using a tree diagram.