Finance help 5-1 (problems 1-5)

Determine the utilization and the efficiency for each of these situations:

a.

A loan processing operation that processes an average of 7 loans per day. The operation has a design capacity of 20 loans per day and an effective capacity of 18 loans per day. (Round your answer to 1 decimal place. Omit the “%” sign in your response.)

  Utilization

. If the design capacity is relatively , the utilization could be  even though the efficiency was .

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 $39,000 for A and $30,000 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

A company manufactures a product using 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 224 units per day. Annual demand is currently 60,000 units. It is forecasted that within two years, annual demand will triple. How many cells should the company plan to acquire to satisfy predicted demand under these conditions? Assume that no cells currently exist. Assume 242 workdays per year. (Round up your answer to the next whole number.)

  Cells

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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.

Determine the capacity of this process.

  Capacity

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A manager must decide which type of machine to buy, A, B, or C. Machine costs (per individual machine) are as follows:

Machine

    Cost

A

$

80,000  

B

$

70,000  

C

$

40,000  

Product forecasts and processing times on the machines are as follows:

PROCCESSING TIME PER UNIT (minutes)

Product

Annual
Demand

A

B

C

1

24,000

1

4

6

2

8,000

1

3

5

3

30,000

6

4

3

4

18,000

6

5

1

a.

Assume that only purchasing costs are being considered. Compute the total processing time required for each machine type to meet demand, how many of each machine type would be needed, and the resulting total purchasing cost for each machine type.  The machines will operate 10 hours a day, 240 days a year. (Enter total processing times as whole numbers.  Round up machine quantities to the next higher whole number.  Compute total purchasing costs using these rounded machine quantities.  Enter the resulting total purchasing cost as a whole number.  Omit the “$” sign.)

  Total processing time in minutes per machine:

  A

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  B

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  C

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  Number of each machine needed and total purchasing cost 

  A

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$ [removed]

  B

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$ [removed]

  C

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$ [removed]

b.

Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating cost of $12 each, B machines have an hourly operating cost of $14 each, and C machines have an hourly operating cost of $15 each.  What would be the total cost associated with each machine option, including both the initial purchasing cost and the annual operating cost incurred to satisfy demand? (Use rounded machine quantities from Part a.  Do not round any other intermediate calculations.  Round your final answers to the nearest whole number.  Omit the “$” sign.)

  Total cost for each machine

  A

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  B

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  C

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