Question 1:

Process Flow Diagram of CRU Rentals

Year 1996

Total number of units = 14,405

Utilization = 0.56 (56%)

Revenue rate = No. of units * rent = 8,000 x 30 = $240,000/wk

Depreciation = 14,405 x ($1000/156wks) = $92,340/wk

Contribution Margin = $126,870/wk

Variable Cost rate = 25 x 1,000 (R) + 25 x 1,000 (S) + 4x700x.85 + 150 x 405 = $113,130/wk

In 1997:

Number of units on rent = 8,000

Total number of units = 15,205

Utilization = 0.53 (53%)

Revenue = 4,800 x 30 + 3,200 x 35 = $256,000/wk

Contribution Margin = $97,618/wk

Depreciation = 15,205 x (1000/156) = $97,468/wk

Cost = 25 x 1,400 (R) + 25 x 1,400 (S) + 4x980 x .85 + 150 x 567 = $158,382/wk

After Change in Demand to 1400 units/week:

The evaluation parameters as calculated in the new scenario:

Number of units on rent = 8,000

Total number of units = 16,967

Utilization = 0.47 (47%)

Revenue = 4,800 x 30 + 3,200 x 35 = $256,000/wk

Contribution Margin= $97,618/wk

Depreciation = 16,967 x (1000/156) = $108,763/wk

Cost = 25 x 1,400 (R) + 25 x 1,400 (S) + 4 x 980x .85 + 150 x 567 = $158,382/wk

When there is no sales drive the demand would reduce to 600 units/week.

In that situation, the following are the parameters:

Number of units on rent = 4,800

Total number of units = 8,643

Utilization = 0.56 (56%)

Revenue = 4,800 x 30 = $144,000/wk

Contribution Margin = $76,122/wk

Depreciation = 8,643 x (1000/156) = $55,404/wk

Cost = 25 x 600 (R) + 25 x 600 (S) + 4x420x .85 + 150 x 243 = $67,878/wk

Question 2:

a) The departments that would be found typically in such an organization in terms of the processes followed in the company are:

1. Water Treatment Department

2. Mixing Department

3.