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**Unformatted text preview: **Problem 5-1 Determine the utilization and the efficiency for each of these situations: a. A loan processing operation that processes an average of 9 loans per day. The operation has a design capacity of 18 loans per day and an effective capacity of 16 loans per day. (Round your answer to 1 decimal place. Omit the "%" sign in your response.) Utilization % Efficiency % b. A furnace repair team that services an average of 3 furnaces a day if the design capacity is 8 furnaces a day and the effective capacity is 7 furnaces a day. (Round your answer to 1 decimal place. Omit the "%" sign in your response.) Utilization % Efficiency % c. Would you say that systems that have higher efficiency ratios than other systems will always have higher utilization ratios than those other systems? This is not necessarily true. If the design capacity is relatively high, the utilization could be low even though the efficiency was high. rev: 03_15_2012 Explanation: a . Actual output 9 Utilization = = = 50 % Design capacity 18 Actual output 9 Efficiency = = = 56.2 % Effective capacity 16 b . Actual output 3 Utilization = = = 37.5 % Design capacity 8 Actual output 3 Efficiency = = = 42.9 % Effective capacity 7 c. This is not necessarily true. If the design capacity is relatively high, the utilization could be low even though the efficiency was high. Problem 5-4 A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $37,000 for A and $33,000 for B; variable costs per unit would be $10 for A and $11 for B; and revenue per unit would be $15. a. Determine each alternative’s break-even point in units. (Round your answer to the nearest whole amount.) Q BEP,A units Q BEP,B units b. At what volume of output would the two alternatives yield the same profit? (Round your answer to the nearest whole amount.) Profit units c. If expected annual demand is 14,000 units, which alternative would yield the higher profit? Higher profit A rev: 03_15_2012 Explanation: FC R VC A: $ 37,0 00 $ 15/unit $ 10/unit B: $ 33,0 00 $ 15/unit $ 11/unit a. FC Q BEP = R − VC $37,000 Q BEP,A = = 7,400 units $15 / unit − $10 / unit $33,000 Q BEP,B = = 8,250 units $15 / unit − $11 / unit b. Profit = Q( R – VC) – FC [A’s Profit] [B’s Profit] Q ($15 – $10) – $37,000 = Q ($15 – $11) – $33,000 Solving, Q = 4,000 units c. P A = 14,000($15 – $10) – $37,000 = $33,000 [A is higher] P B = 14,000($15 – $11) – $33,000 = $23,000 Problem 5-9 A company manufactures a product using two machine cells. Each cell has a design capacity of 250 units per day and an effective capacity of 230 units per day. At present, actual output averages 200 units per cell, but the manager estimates that productivity improvements soon will increase output to 228 units per day. Annual demand is currently 50,000 units. It is forecasted that within two years, annual demand per day....

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