BMGT 322 - Operations Management
Break-Even Analysis Practice Problem IV Solution
The following diagram shows a 4-step process that begins with Operation 1 and ends
with Operation 4. The rates shown in each box represent the effective capacity of
that operation.
Operation
1
12 / hr.
Operation
2
15 / hr.
Operation
3
11 / hr.
Operation
4
14 / hr.
a. Determine the capacity of this entire process.
The capacity of the entire process is that of the lowest individual capacity, that of Operation 3, or
11 units/hour.
b. Which action would yield the greatest increase in process capacity?
1) Increase the capacity of Operation 1 by 15%
2) Increase the capacity of Operation 2 by 10%
3) Increase the capacity of Operation 3 by 10%
Increasing Operation 1 or 2 would not be effective unless Operation 3 is increased first as Operation 3
is the bottleneck. Increasing Operation 3 by 10% would increase it to 11*1.1 = 12.1 units per hour
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