# Cru Computer Rental Case Solutions

Topics: 175, Variable cost, Contribution margin Pages: 6 (1610 words) Published: July 11, 2012
CRU Computer Rental Case Solutions

Solution 1

TABLE 1: CRU FLOWS
| Customer| Receiving| Status 24| Status 40| Stored Orders| Orders at Suppliers| Status 41| Status 42| Status 20| | | | | | | | | | |
Throughput(Units/Week)| 1000| 1000| 1000*.70=700| 1000*.30+ .15*700= 405| 405| 405| 405| 405| 1000| | | | | | | | | | |
Inventory(Units)| 8000= 8*1000| 500| 1500| 1000| 500| 405= 405*1| 500+405 = 905| 500| 2000=2*1000| | | | | | | | | | |
Flow Time(Weeks)| 8| 0.5= 500/1000| 2.14= 1500/700| 2.46=1000/405| 1.23= 500/405| 1| 2.23| 1.23= 500/405| 2|

Note:
         Numbers in Black are given
         Numbers in red are calculated by using formula   Av. flow time = Inventory/Throughput          Numbers in Green shows a constant flow in units after status 40 to status 42

Solution 2
Utilization = No. of units on rent / No. of units owned by CRU = Inventory on rent/ Total inventory No. of units on rent = No. of units rented per week* No of weeks = 1000*8 = 8000 Total Inventory = Sum of no. of inventory units in the following buffers: =SUM(Customer, Receiving, Status 24, Status 40, Status 41 , Status 42 , Status 20) = 14405 Therefore, Utilization = 8000/14405 = .55 or 55 %

Solution 3
Av. time spent by a unit in each buffer can be found in 3rd row of Table 1 and is calculated by using the following formula: Av. flow time = Inventory/Throughput
BUFFER| Inventory| Throughput| Av. Time (WEEKS)|
Customer| 8000| 1000| 8000/1000= 8|
Receiving| 500| 1000| 500/1000= .5|
Status 24| 1500| 700| 1500/700= 2.14|
Status 40| 1000| 405| 1000/405= 2.46|
Stored Orders| 500| 405| 500/405= 1.23|
Orders at Suppliers| 405| 405| 405/405= 1|
Status 41| 905| 405| 905/405= 2.23|
Status 42| 500| 405| 500/405= 1.23|
Status 20| 2000| 1000| 2000/1000= 2|

Solution 4
Profit = Revenue- variable Cost – Depreciation
Revenue = No. of units * Av. revenue per unit = 8000*30 = 240000 Variable cost = Shipping and Return cost + Av. Material cost when repairing (Status 40) + Av material cost per unit to convert it from Status 24 to Status 20 Shipping and return Cost = 2 *25 *1000= 50000

Av. Material Cost when repairing = No of units for tech test (Status 40)*Av unit cost when repairing  = 405*150= 60750
Av material cost per unit to convert it from status 24 to status 20 = 4*700*.85= \$ 2380 Total variable cost = 50000+60750+2380= \$ 113130
St. Line depreciation per week = Total no. of units * price per unit / total no. of weeks = 14405*1000/156= 92340
Therefore, Profit= 240000- 113130- 92340= \$ 34,530
Contribution margin = Rev – variable cost = 24000-113130= 126870 Comparing to Depreciation the Contribution margin is more. CM > DM

Solution 5
To solve this problem we can compare the profits generated after company had launched sales drive to the profit generated if the company didn’t opt to use sales drive. Therefore, there will be two cases: Case 1:  Demand increases to 1400 units per week and time flow is same (with Sales Drive) TABLE 2

| Customer| Receiving| Status 24| Status 40| Stored Orders| Orders at Suppliers| Status 41| Status 42| Status 20| | | | | | | | | | |
Throughput(Units/Week)| 1400| 1400| 980| 1400*.30+ .15*980= 567| 567| 567| 567| 567| 1400| | | | | | | | | | |
Inventory(Units)| 8000| 1400*.5=700| 980*2.14=2097| 567*2.46=1400| 567*1.23=697| 567*1=567| 567*2.23=1264| 567*1.23=697| 1400*2=2800| | | | | | | | | | |
Flow Time(Weeks)| 8000/1400= 5.71| 0.5| 2.14| 2.46| 1.23| 1| 2.23| 1.23| 2|

It is given those 600 units out of 1400 were rented for 8 weeks and remaining 800 units for 4 weeks. Revenue = 600*8*30 + 800* 4* 35 = 256000
Variable cost = 2*25*1400 + 4*980*.85 + 150*567= 158382
St. Line Dep. = 16958*1000/156= 108705
Profit = 256000-158382-108705= \$-11087 (LOSS)

Case 2: Demand is 600 units per week...