# Chapter 7 - Annual Contracted Units Annual Fixed Costs Per...

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Annual Contracted Units 200000 200000 200000 Annual Fixed Costs \$100,000 \$200,000 \$500,000 Per Unit Valuable Cost \$15.00 \$14.00 \$13.00 For U units produced, the functions are as follows For GPE, the cost is C = 100000 +15U For FMS, the cost is C = 200000 + 14U For DM, the cost is C = 500000 + 13U. U=200000 GPE Cost is 3100000 FMC Cost is 3000000 DM Cost is 3100000 The cheapest is the FMC cost General Purpose Equipment (GPE) Flexible Manufacturing System (FMS) Dedicate Machine (DM)

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We proceed as above, but this time with different values for U. When U = 75000, GPE C = 1225000 FMS C = 1250000 DM C = 1475000 cheapest is GPE When U = 275000, GPE C = 4225000 4225000 FMS C = 4050000 4050000 DM C = 4075000 4075000 cheapest is FMS. When U = 375000 GPE C = 5725000 5725000 FMC C = 5450000 5450000 DM C = 5375000 5375000 cheapest is DM.
Expected Rooms Rented 18250 Current: Fixed Cost \$61,000 Variable Cost \$12.50 Outsourcing: Fixed Cost \$25,000 Variable Cost \$18.50 61,000+ (12.50)x=25000+(18.50)x 36000=6x x=6000 crossover point in room nights Tim should not outsource the cleanup since he expects to rent 18,250 rooms

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Utilization = Actual output/Design capacity Efficiency = Actual output/Effective capacity Actual (or Expected) output = (Effective capacity) (Efficiency) Effective Capacity 6500 Efficiency 0.88 Actual output 5720
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• Fall '14
• Capacity utilization, GPE

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