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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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