operations management excel problems
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chpt_23_homework.docxChapter 2
1. Two workers have the job of placing plastic labels on packages before the packages are shipped out. The first worker can place 1000 labels in 30 minutes. The second worker can place 850 labels in 20 minutes. Which worker is more productive?
2. Last week a painter painted three houses in five days. This week she painted two houses in four days. In which week was the painter more productive?
3. One type of bread-making machine can make six loaves of bread in five hours. A new model of the machine can make four loaves in two hours. Which model is more productive?
4. A company that makes kitchen chairs wants to compare productivity at two of its facilities. At facility #1, six workers produced 240 chairs. At facility #2, four workers produced 210 chairs during the same time period. Which facility was more productive?
5. A painter is considering using a new high-tech paint roller. Yesterday he was able to paint three walls in 45 minutes using his old method. Today he painted two walls of the same size in 20 minutes. Is the painter more productive using the new paint roller?
6. Aztec Furnishings makes hand-crafted furniture for sale in its retail stores. The furniture maker has recently installed a new assembly process, including a new sander and polisher. With this new system, production has increased to 90 pieces of furniture per day from the previous 60 pieces of furniture per day. The number of defective items produced has dropped from 10 pieces per day to 1 per day. The production facility operates strictly eight hours per day. Evaluate the change in productivity for Aztec using the new assembly process.
7. Howard Plastics produces plastic containers for use in the food packaging industry. Last year its average monthly production included 20,000 containers produced using one shift five days a week with an eight-hour-a-day operation. Of the items produced 15 percent were deemed defective. Recently, Howard Plastics has implemented new production methods and a new quality improvement program. Its monthly production has increased to 25,000 containers with 9 percent defective.
· (a) Compute productivity ratios for the old and new production system.
· (b) Compare the changes in productivity between the two production systems.
8. Med-Tech labs is a facility that provides medical tests and evaluations for patients, ranging from analyzing blood samples to performing magnetic resonance imaging (MRI). Average cost to patients is $60 per patient. Labor costs average $15 per patient, materials costs are $20 per patient, and overhead costs are averaged at $20 per patient.
· (a) What is the multifactor productivity ratio for Med-Tech? What does your finding mean?
· (b) If the average lab worker spends three hours for each patient, what is the labor productivity ratio?
Chapter 3
1. See-Clear Optics is considering producing a new line of eyewear. After considering the costs of raw materials and the cost of some new equipment, the company estimates fixed costs to be $40,000 with a variable cost of $45 per unit produced.
· (a) If the selling price of each new product is set at $100, how many units need to be produced and sold to break even? Use both the graphical and algebraic approaches.
· (b) If the selling price of the product is set at $80 per unit, See-Clear expects to sell 2000 units. What would be the total contribution to profit from this product at this price?
· (c) See-Clear estimates that if it offers the product at the original target price of $100 per unit, the company will sell about 1500 units. Will the pricing strategy of $100 per unit or $80 per unit yield a higher contribution to profit?
2. Med-First is a medical facility that offers outpatient medical services. The facility is considering offering an additional service, mammography screening tests, on-site. The facility estimates the annual fixed cost of the equipment and skills necessary for the service to be $120,000. Variable costs for each patient processed are estimated at $35 per patient. If the clinic plans to charge $55 for each screening test, how many patients must it process a year in order to break even?
3. Tasty Ice Cream is a year-round take-out ice cream restaurant that is considering offering an additional product, hot chocolate. Considering the additional machine it would need plus cups and ingredients, it estimates fixed costs to be $200 per year and the variable cost to be $0.20. If it charges $1.00 for each hot chocolate, how many hot chocolates does it need to sell in order to break even?
4. Slick Pads is a company that manufactures laptop notebook computers. The company is considering adding its own line of computer printers as well. It has considered the implications from the marketing and financial perspectives and estimates fixed costs to be $500,000. Variable costs are estimated at $200 per unit produced and sold.
· (a) If the company plans to offer the new printers at a price of $350, how many printers does it have to sell to break even?
· (b) Describe the types of operations considerations that the company needs to consider before making the final decision.
5. Perfect Furniture is a manufacturer of kitchen tables and chairs. The company is currently deciding between two new methods for making kitchen tables. The first process is estimated to have a fixed cost of $80,000 and a variable cost of $75 per unit. The second process is estimated to have a fixed cost of $100,000 and a variable cost of $60 per unit.
· (a) Graphically plot the total costs for both methods. Identify which ranges of product volume are best for each method.
· (b) If the company produces 500 tables a year, which method provides a lower total cost?
6. Harrison Hotels is considering adding a spa to its current facility in order to improve its list of amenities. Operating the spa would require a fixed cost of $25,000 a year. Variable cost is estimated at $35 per customer. The hotel wants to break even if 12,000 customers use the spa facility. What should be the price of the spa services?
7. Kaizer Plastics produces a variety of plastic items for packaging and distribution. One item, container #145, has had a low contribution to profits. Last year, 20,000 units of container #145 were produced and sold. The selling price of the container was $20 per unit, with a variable cost of $18 per unit and a fixed cost of $70,000 per year.
· (a) What is the break-even quantity for this product? Use both graphic and algebraic methods to get your answer.
· (b) The company is currently considering ways to improve profitability by either stimulating sales volumes or reducing variable costs. Management believes that sales can be increased by 35 percent of their current level or that variable cost can be reduced to 90 percent of their current level. Assuming all other costs equal, identify which alternative would lead to a higher profit contribution.
8. George Fine, owner of Fine Manufacturing, is considering the introduction of a new product line. George has considered factors such as costs of raw materials, new equipment, and requirements of a new production process. He estimates that the variable costs of each unit produced would be $8 and fixed costs would be $70,000.
· (a) If the selling price is set at $20 each, how many units have to be produced and sold for Fine Manufacturing to break even? Use both graphical and algebraic approaches.
· (b) If the selling price of the product is set at $18 per unit, Fine Manufacturing expects to sell 15,000 units. What would be the total contribution to profit from this product at this price?
· (c) Fine Manufacturing estimates that if it offers the product at the original target price of $20 per unit, the company will sell about 12,000 units. Which pricing strategy—$18 per unit or $20 per unit—will yield a higher contribution to profit?
· (d) Identify additional factors that George Fine should consider in deciding whether to produce and sell the new product.
9. Handy-Maid Cleaning Service is considering offering an additional line of services to include professional office cleaning. Annual fixed costs for this additional service are estimated to be $9000. Variable costs are estimated at $50 per unit of service. If the price of the new service is set at $80 per unit of service, how many units of service are needed for Handy-Maid to break even?
10. Easy-Tech Software Corporation is evaluating the production of a new software product to compete with the popular word processing software currently available. Annual fixed costs of producing the item are estimated at $150,000, and the variable cost is $10 per unit. The current selling price of the item is $35 per unit, and the annual sales volume is estimated at 50,000 units.
· (a) Easy-Tech is considering adding new equipment that would improve software quality. The negative aspect of this new equipment would be an increase in both fixed and variable costs. Annual fixed costs would increase by $50,000 and variable costs by $3. However, marketing expects the better-quality product to increase demand to 70,000 units. Should Easy-Tech purchase this new equipment and keep the price of their product the same? Explain your reasoning.
· (b) Another option being considered by Easy-Tech is the increase in the selling price to $40 per unit to offset the additional equipment costs. However, this increase would result in a decrease in demand to 40,000 units. Should Easy-Tech increase its selling price if it purchases the new equipment? Explain your reasoning.
11. Zodiac Furniture is considering the production of a new line of metal office chairs. The chairs can be produced in-house using either process A or process B. The chairs can also be purchased from an outside supplier. Specify the levels of demand for each processing alternative given the costs in the table.
12. Mop and Broom Manufacturing is evaluating whether to produce a new type of mop. The company is considering the operations requirements for the mop as well as the market potential. Estimates of fixed costs per year are $40,000, and the variable cost for each mop produced is $20.
· (a) If the company sells the product at a price of $25, how many units of product have to be sold in order to break even? Use both the algebraic and graphical approaches.
· (b) If the company sells 10,000 mops at the product price of $25, what will be the contribution to profit?
13. Mop and Broom Manufacturing, from Problem 12, has decided to produce a new type of mop. The mop can be made with the current equipment in place. However, the company is considering the purchase of new equipment that would produce the mop more efficiently. The fixed cost would be raised to $50,000 per year, but the variable cost would be reduced to $15 per unit. The company still plans to sell the mops at $25 per unit. Should Mop and Broom produce the mop with the new or current equipment described in Problem 12? Specify the volume of demand for which you would choose each process.
14. Jacob's Baby Food Company must go through the following steps to make mashed carrots: (1) unload carrots from truck; (2) inspect carrots; (3) weigh carrots; (4) move to storage; (5) wait until needed; (6) move to washer; (7) boil in water; (8) mash carrots; (9) inspect. Draw a process flow diagram for these steps.
15. Draw a process flow diagram of your last doctor's office visit. Identify bottlenecks. Did any activities occur in parallel?
16. Oakwood Outpatient Clinic is analyzing its operation in an effort to improve performance. The clinic estimates that a patient spends on average 3½ hours at the facility. The amount of time the patient is in contact with staff (i.e., physicians, nurses, office staff, lab technicians) is estimated at 40 minutes. On average the facility sees 42 patients per day. Their standard has been 40 patients per day. Determine process velocity and efficiency for the clinic.
17. Oakwood Outpatient Clinic rents a magnetic resonance imaging (MRI) machine for 30 hours a month for use on its patients. Last month the machine was used 28 hours out of the month. What was machine utilization?
