Ops 571

Chapter 6, Problem # 2

Audio Cable Initial Scenario: Production Volume – 30,000 units / year

Initial Fixed Cost $ (14,000)

Variable Cost = 0.5 * 30,000 = $ (15,000)

Revenue = 1.0 * 30,000 = $ 30,000

NPV = $ 1,000

Audio Cable Updated Scenario: Production Volume – 50,000 units / year

Initial Fixed Cost $ (14,000) + (6,000) = $ (20,000)

Variable Cost = 0.6 * 50,000 = $ (30,000)

Revenue = 1.0 * 50,000 = $ 50,000

NPV = $ 0

Overall based on the information the new added fixed cost would improve the overall quality.

Chapter 6, Problem # 5

Scenario # 1

Initial Station Drilling Station Assembly Final Output

A + B C

140 /hour 3 * 50 = 150 /hr 160 / hr

8 hr, 5 days 8 hr, 5 days 8 hr, 5 days

Limiting Step is process A + B, @ 140 / hr

Output = 140 * 8 * 5 = 5600 / weekScenario # 2

Initial Station Drilling Station Assembly Final Output

A + B C

140 /hour 4 * 50 = 200 /hr 160 / hr

16 hr, 5 days 8 hr, 5 days 16 hr, 5 days

Limiting Step is process A + B, @ 140 / hr , but from throughput point of view it is Operation C as it only runs for 8 hours

Output = 200 * 8 * 5 = 8000 / week

Scenario # 3

Initial Station Drilling Station Assembly Final Output

A + B C

140 /hour 6 * 50 = 300 /hr 160 / hr

16 hr, 5 days 8 hr, 5 days 12 hr, 5 days

Limiting Step is...