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# The Good Stuff Essay

916 words - 4 pages

Chapter 2.

(6) A firm is evaluating the alternative of manufacturing a part that is currently being outsourced from a supplier. The relevant information is provided below:

For in-house manufacturing
Annual fixed cost = \$45,000
Variable cost per part = \$140
Purchase price per part = \$160

Using this information, determine the break-even quantity for which the firm would be indifferent between manufacturing the part in-house or outsourcing it.

Using Equation 2.1 we compute

Q* = ______FC_______ = \$45,000 = 2,250 parts
VC2 - VC1 \$160 - \$140
...view middle of the document...

00

Chapter 3

(4) A hamburger factory produces 40,000 hamburgers each week. The equipment used costs \$5,000 and will remain productive for three years. The labor cost per year is \$8,000.

a. What is the productivity measure of “units of output per dollar of input” averaged over the three-year period?

Productivity = total units produced divided by the total labor cost plus total equipment cost

= 40,000(52)(3)/[8000(3) + 5000] = 215.2 hamburgers/dollar

b. We have the option of buying \$10,000 of equipment, with an operating life of five years. It would reduce labor costs to \$4,000 per year. Should we consider purchasing this equipment (using productivity arguments alone)?

For the expensive machine, productivity = 40,000(52)(5)/[4000(5) + 10,000] = 346.7 units of output/dollar input. Because the productivity of the expensive machine is higher, it would be a good investment.

Chapter 7
(4) Service rate = 3 minutes/call or 10 calls/30 minutes/CSR
Utilization (U) = Demand Rate/[Service Rate*Number of Servers] (Eq. 7.2)
0.80 = DR/[(10 calls/30minutes/CSR)(2 CSRs)
DR = 0.80*20 = 16 calls/30 minutes

(5) Utilization (U) = Demand Rate/[Service Rate*Number of Servers] (7.2)
0.90 = 27 customers/hour/[SR*(2 tellers)]
2*(.90)SR = 27 customers/hour
1.8 SR = 27
SR = 15 customers/hour/teller

(6) WIP = R* T = (300 checks/day)(20 days) = 6,000 checks
WIP = R* T = (300 checks/day)(5 days) = 1,500 checks

The new information technology dramatically speeds up the process and simultaneously lowers the average number of checks (WIP) in...

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