Strategic Capacity Planning for Products and Services Pt 5

88. A small business owner is contemplating the addition of another product line. Capacity increases and equipment will result in an increase in annual fixed costs of $50,000. Variable costs will be $25 per unit. (A) What unit selling price must the owner obtain to break even on a volume of 2,500 units a year? (B) Because of market conditions, the owner feels a revenue of $47 is preferred to the value determined in part A. What volume of output will be required to achieve a profit of $16,000 using this revenue? Feedback: Solving for revenue (given a break-even profit of $0), we find that the per-unit revenue must be $45. Given a per-unit revenue of $47 and a desired total profit of $16,000, we solve for volume to find the required output to be 3,000 units per year. 89. The efficiency of a productive unit is 60 percent. The unit produces an average of 20 forklift trucks per day. Determine the effective capacity of the unit. Feedback: Divide the output by 0.60 to find the effective capacity. 90. The utilization of a machine is 50 percent. The machine has a design capacity of 70 units per hour and an effective capacity of 60 units per hour. Find the efficiency of the machine. Feedback: First solve for actual output by multiplying the design capacity (70 per hour) by 0.5. Then, divide the actual output (35 per hour) by effective capacity (60 per hour) to find efficiency. 91. Given the following data for a make-or-buy decision: What are total costs to buy a quantity of 15,000 units per year? $120,000 Feedback: Multiply 15,000 by the per-unit purchase cost of $8. 92. Given the following data for a make-or-buy decision: What are total costs to make a quantity of 15,000 units per year? $160,000 Feedback: Multiply the per-unit make cost of $4 per unit, and add the fixed cost of $100,000. 93. Given the following data for a make-or-buy decision: For what quantity would you be indifferent between buying and making? 25,000 units per year Feedback: Divide the difference in fixed cost ($100,000) by the difference in perunit cost ($8 - $4). 94. Given the following data for a make-or-buy decision: For what range of output would you prefer to buy? 1 to 24,999 Feedback: In low quantities (<25,000), it is more economical to buy due to the fixed costs of making. 95. Given the following data for a make-or-buy decision: For what range of output would you prefer to make? 25,000 and above Feedback: In large quantities (>25,000), it is more economical to make because the difference in fixed cost is more than made up by the more attractive per-unit cost of make. 96. Given the following data for a make-or-buy decision: Which alternative would you select for a quantity of 24,000 units per year? Buy Feedback: This quantity is less than that at which we are indifferent between making or buying. For lower volumes, buying is more economical. 97. Given the following data for a make-or-buy decision: What would be your total costs for the preferred alternative, for 32,000 units per year? Make! $228,000 Feedback: This quantity is in excess of that at which we are indifferent between making or buying. For higher volumes, making is more economical. 98. Given the following data for a make-or-buy decision: What would be your cost savings for the preferred alternative, for 32,000 units per year, compared to the other alternative? Make! $228,000 Feedback: Making would have a total cost of $228,000, while buying would have a total cost of $256,000. 99. Consider the following information: What is the break-even quantity (produced and sold)? 25,000 units Feedback: Divide the fixed cost ($15,000) by the per-unit margin ($0.60). 100. Consider the following information: What are total revenues for the break-even quantity? $40,000 Feedback: Multiple the break-even quantity (25,000) by the per-unit price ($1.60). 101. Consider the following information: What are total costs for the break-even quantity? $40,000 Feedback: Fixed cost would be $15,000. Variable cost would be $25,000. 102. Consider the following information: What quantity would be required for a profit of $2,000? 28,334 units Feedback: Add the desired profit to the fixed cost, then divide the sum by the perunit contribution margin of $0.60. 103. Consider the following information: What profit (loss) would there be for a quantity of 27,000? $1,200 Feedback: Total revenue would be $43,200. Total cost would be $42,000 (fixed = $15,000; variable = $27,000). 104. Consider the following information: What profit (loss) would there be for a quantity of 10,000? $9,000 loss Feedback: Total revenue would be $16,000. Total cost would be $42,000 (fixed = $15,000; variable = $10,000). 105. Consider the following information: What is the anticipated utilization? 80 percent Feedback: Divide actual output by design capacity. 106. Consider the following information: What is the anticipated efficiency? 90 percent Feedback: Divide actual output by effective capacity.