MGT329Chap5e12Handout[09]

MGT329Chap5e12Handout[09] - Management 329-Practice...

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Management 329 -Practice Problems for Capacity Planning (Chapter 5) 1. Old English Tea Company blends and packages an average of 8000 boxes of tea per shift. Eighteen people tend the production line, and the company has (on average) a capacity cushion of 10%. Demand is down and the production rate must be reduced to meet demand of 6800 boxes per shift. How many people should be added or how many assigned to other work? Assume that labor and output rate are linearly related. 2. Jupiter Manufacturing must implement a manufacturing process that reduces the amount of toxic by-products. Two processes have been identified that produce the same level of toxic by-product reduction. The first process would incur $300,000 of fixed costs and $600 per unit variable costs. The second process has fixed costs of $120,000 and variable costs of $900 per unit. a) What is the breakeven quantity beyond which the first process is more attractive? b) What is the difference in total cost if the quantity produced is 800 units?
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