Strategic Capacity Planning for Products and Services
CHAPTER 5
STRATEGIC CAPACITY PLANNING
FOR PRODUCTS AND SERVICES
PROBLEMS
P1.
The Crystal Sparkle Co. produces glass tumblers.
The plant is designed to produce 400 tumblers
per hour, and there is one eighthour shift per working day.
However, the plant does not operate
for the full eight hours: the employees take two 15minute breaks in each shift, one in the first
four hours and one in the second four hours, and the first thirty minutes of the shift are spent
raising the kilns to the required temperature for firing glass.
The plant usually produces about
10,000 tumblers per fiveday workweek.
Answer the following questions by adjusting the data to
one eighthour shift.
a.
What is the design capacity of the plant in tumblers, per shift?
b.
What is the effective capacity in tumblers per shift?
c.
What is the actual output in tumblers per shift?
d.
What is the efficiency ratio?
e.
What is the utilization ratio?
P2.
The Goode and Cooke Company produces several models of frying pans.
There is little
difference in the production time required for the various models; the plant is designed to produce
160 frying pans per eighthour shift, and there are two shifts per working day.
However, the
plant does not operate for the full eight hours: the employees take two 12minute breaks in each
shift, one in the first four hours and one in the second four hours; two hours per week are devoted
to cleaning the factory and performing maintenance on the machines; one fourhour period every
four weeks is devoted to the meeting of the quality circle.
The plant usually produces about
3,500 frying pans per fourweek period.
You may ignore holidays in solving this problem.
Answer the following questions by adjusting the data to a fourweek time period.
a.
What is the design capacity in frying pans?
b.
What is the effective capacity in frying pans?
c.
What is the actual output?
d.
What is the efficiency?
e.
What is the utilization?
f.
Rework the problem using a time period of one eighthour shift.
P3.
The selling price of the product is $199.95. The variable costs per unit are:
Labor
$60.25
Raw material
$25.70
Purchased component
$21.50
Variable overhead
$17.50
The fixed costs total $300,000 per year.
Perform a costvolume (breakeven) analysis of this company.
a.
State total revenue as a formula, for any given volume of Q products.
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 Spring '08
 WILLIAMCOSGROVE
 Depreciation, Frying pan, Products and Services

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