# Capacity: Costs and Rs

Topics: Costs, Variable cost, Fixed cost Pages: 3 (566 words) Published: November 11, 2010
SOLUTION OF ASSIGNMENT OF OPERATIONS MANAGEMENT
CAPACITY PLANNING

1. If a plant was designed to produce 7,000 hammers per day, but is limited to making 6,000 hammers per day because of the time needed to change equipment between styles of hammers, what is the utilization?

Solution:
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2. If a plant has an effective capacity of 6,500 and an efficiency of 88%, what is the actual output?

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3. Crescent Textile Mills wants to increase capacity by overcoming a bottleneck operation through the addition of new equipment. Two vendors have presented proposals. The revenue generated by each unit is Rs 20.00. The costs for each proposal are shown below:

|Amounts are in Rs. |PROPOSAL A |PROPOSAL B | |FIXED COSTS |50,000 |70,000 | |VARIABLE COST |12.00 |10.00 |

a. What is the break-even point in units for proposal A? b. What is the break-even point in units for proposal B?

(a) Proposal A breakeven in units is:
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(b) Proposal B breakeven in units is:
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4. Jehanzeb, the owner of Pizza First, is considering a new oven in which to bake the firm’s vegetarian pizza. Oven Type A can handle 20 pizzas an hour. The fixed costs associated with oven A are Rs 20,000 and the variable costs are Rs 2.00 per pizza. Oven B is larger and can handle 40 pizzas an hour. The fixed costs associated with Oven B are Rs 30,000 and the variable costs are Rs 1.25 per pizza. The pizzas sell for Rs 14 each. a. What is the break-even point for each oven?

b. If Jehanzeb expects to sell 9,000 pizzas, which oven should he purchase? c. If Jehanzeb expects to sell 12,000 pizzas, which oven should he purchase? d. At what volume...

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