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**Unformatted text preview: **Chapter 5 Calculation Page 194 Example A department works one 8-hour shift, 250 days per year, and has these figures for usage of a machine that is currently being considered: Product (1) D i Annual Demand (2) P i Standard processing time per unit .(Hr) (3) Processing time needed (Hr) (2)*(3) D i * P i 1 400 5.0 400*5 =2000 2 300 8.0 300*8 = 2400 3 700 2.0 700*2 =1400 5800 horizon planning the during available time processing horizon planning the during product for demand product for time processing standard machines required of number where 1 = = = = = ∑ = T i D i p N T D p N i i R k i i i R Working one 8-hour shift 250 days a year provides an annual capacity= 8 *250 = 2000 hours per year=T Required volume = 5800 hours/(2000hours/machine =2.90 machines = 5800/2000 Page 202 Cost-Volume Analysis • Cost-volume analysis – Focuses on the relationship between cost, revenue, and volume of output • Fixed Costs (FC) – tend to remain constant regardless of output volume • Variable Costs (VC) – vary directly with volume of output – VC = Quantity ( Q ) x variable cost per unit ( v ) • Total Cost – TC = Q x v • Total Revenue (TR) – TR = revenue per unit ( R ) x Q Break-Even Point (BEP) • BEP – The volume of output at which total cost and total revenue are equal – Profit ( P ) = TR – TC = ...

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