A plant operation has a fixed costs of $2,000,000 per year and its output capacity is 100,000 electrical appliances per year. The variable cost is $40 per unit and the product sells for $90 per unit. Compare annual profit when the plant is operating at 90% of capacity with the plant operation at 100% capacity. Assume that the first 90% of capacity output is sold at $90 per unit and that the remaining 10% of production is sold at $70 per unit.
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- It costs a pharmaceutical company 75,000 to produce a 1000-pound batch of a drug. The average yield from a batch is unknown but the best case is 90% yield (that is, 900 pounds of good drug will be produced), the most likely case is 85% yield, and the worst case is 70% yield. The annual demand for the drug is unknown, with the best case being 20,000 pounds, the most likely case 17,500 pounds, and the worst case 10,000 pounds. The drug sells for 125 per pound and leftover amounts of the drug can be sold for 30 per pound. To maximize annual expected profit, how many batches of the drug should the company produce? You can assume that it will produce the batches only once, before demand for the drug is known.The Tinkan Company produces one-pound cans for the Canadian salmon industry. Each year the salmon spawn during a 24-hour period and must be canned immediately. Tinkan has the following agreement with the salmon industry. The company can deliver as many cans as it chooses. Then the salmon are caught. For each can by which Tinkan falls short of the salmon industrys needs, the company pays the industry a 2 penalty. Cans cost Tinkan 1 to produce and are sold by Tinkan for 2 per can. If any cans are left over, they are returned to Tinkan and the company reimburses the industry 2 for each extra can. These extra cans are put in storage for next year. Each year a can is held in storage, a carrying cost equal to 20% of the cans production cost is incurred. It is well known that the number of salmon harvested during a year is strongly related to the number of salmon harvested the previous year. In fact, using past data, Tinkan estimates that the harvest size in year t, Ht (measured in the number of cans required), is related to the harvest size in the previous year, Ht1, by the equation Ht = Ht1et where et is normally distributed with mean 1.02 and standard deviation 0.10. Tinkan plans to use the following production strategy. For some value of x, it produces enough cans at the beginning of year t to bring its inventory up to x+Ht, where Ht is the predicted harvest size in year t. Then it delivers these cans to the salmon industry. For example, if it uses x = 100,000, the predicted harvest size is 500,000 cans, and 80,000 cans are already in inventory, then Tinkan produces and delivers 520,000 cans. Given that the harvest size for the previous year was 550,000 cans, use simulation to help Tinkan develop a production strategy that maximizes its expected profit over the next 20 years. Assume that the company begins year 1 with an initial inventory of 300,000 cans.At the beginning of each week, a machine is in one of four conditions: 1 = excellent; 2 = good; 3 = average; 4 = bad. The weekly revenue earned by a machine in state 1, 2, 3, or 4 is 100, 90, 50, or 10, respectively. After observing the condition of the machine at the beginning of the week, the company has the option, for a cost of 200, of instantaneously replacing the machine with an excellent machine. The quality of the machine deteriorates over time, as shown in the file P10 41.xlsx. Four maintenance policies are under consideration: Policy 1: Never replace a machine. Policy 2: Immediately replace a bad machine. Policy 3: Immediately replace a bad or average machine. Policy 4: Immediately replace a bad, average, or good machine. Simulate each of these policies for 50 weeks (using at least 250 iterations each) to determine the policy that maximizes expected weekly profit. Assume that the machine at the beginning of week 1 is excellent.
- A plant operation has fixed cost of $2,000,000 per year, and its output capacity is 100,000 electrical appliances per year. The variable cost is $70 per unit, and the product sells for $120 per unit. a) What is the annual break even volume of this product? b) Compare annual profit when the plant is operating at 90% capacity with the plant operation at 100% capacity. Assume that the first 90% of capacity output is sold at $120 per unit and that the remaining 10% of production is sold at $100 per unit. Show handwritten solutionsA company has the following demand data for the last three years of sales for their popular product B. There are currently 5 workers assigned to the production line, each capable of producing approximately 8 units per month. It is assumed that each month has the same number of production days. They can hire more workers at a hiring and training cost of $800 per worker. If they layoff any workers, the unemployment cost is $2,000 per worker. The product has a standard production cost (labor, material, and overhead) of $300 per unit. The extra cost to produce one unit on overtime is $50 and the maximum overtime is two units per month per worker. They can use inventory but it will cost them $25 per unit per month for any unit in inventory at the end of the month. Failure to meet market demand typically will imply the customer will buy from another supplier, and therefore cost the company $100 in profit. They currently have 0 units in inventory. a. Use the demand data to develop a forecast…A building has an NOI of $130,000 and is being valued with a cap rate of 4%. Using the income approach, what is the value of the building? $4,130,000 $1,300,000 $3,250,000 $2,450,000
- As a potential owner of a club known as Club Salida, you are interested in determining the necessary volume of sales in dollars to reach the breakeven next year. You decided to break down the club's sales into. four categories, where beer is the first. Your estimate of the sale of beer is that it will serve 30,000 servings. The selling price per unit will average $ 1.50; its cost is $ .75. The second category is food, of which you expect sell 10,000 units with an average unit price of $ 10.00 and a cost of $ 5.00. The third category is desserts and wine, of which you also hope to sell 10,000 units, but with an average unit price of $ 2.50 and a cost of $ 1.00. The last category is inexpensive lunches and sandwiches, of which you expect sell a total of 20,000 units with an average price of $ 6.75 and a cost per unit of $ 3.25. Your fixed costs (i.e. rent, utilities, etc.) are $ 1,800 a month plus $ 2,000 a month for entertainment. a) What is your breakeven point in dollars per month? b)…A firm is considering the installation of an automatic data processing unit to handle some of its accounting operations. Machines for that purpose may be purchased for 20,000 or may beleased for 8,000 for the first year and 1,000 less every year now and then until the end of the fourth year. If money is worth 15%, is it advisable to rent or buy a machine?A firm produces three products. Product A sells for $60; its variable costs are $20. Product B sells for $200; its variable costs are $120. Product C sells for $25; its variable costs are $10. Last year, the firm sold 1000 units of A 2000 units of B, and 10,000 units of C The firm has fixed costs of $320,000 per year. Calculate the break-even point of the firm.
- You have been hired by Kia as manager for its Pakistan operations. Assume following is the short-run production function at their assembly plant outside Karachi: Q = 10L2 – 0.5 L3 where L is variable input labor, Q is output of Cars assembled a. At the end of the year it is expected that output will double with purchase ofnew equipment and machinery. The production function is estimated to be Q = 60L.30K.70 where L is labor and K is capital. Suppose initial L1 = 1 and K1 = 1. When inputs are in increased to L2 = 2 and K2 = 2, do you observe increasing, decreasing or constant returns to scale? b. Assume Kia Head Office is considering hiring more laborers either at their Gwadar plant or alternatively at the Karachi plant. What will be your advice if workers’ marginal product is 40 at wage of Rs=5/hour in Karachi and marginal product is 28 at wage of Rs=4/hour in Gawdar?Sturgill Manufacturing Inc. needs to predict the numbers of machines and employees required to produce its planned production for the coming year. The plant runs three shifts continuously during the workweek, for a total of 120 hours of capacity per week. The shop efficiency (the percent of total time available for production), which accounts for setups, changeovers, and maintenance, averages 70% with a standard deviation of 5%, which reduces the weekly capacity. Six key parts are produced, and the plant has three different types of machines to produce each part. The machines are not interchangeable as they each have a specific function. The time to produce each part on each machine varies. The mean time and standard deviation (in hours) to produce each part on each machine are shown below: Mean Time Part Type Machine A Machine B Machine C 1 3.5 2.6 8.9 2 3.4 2.5 8 3 1.8 3.5 12.6 4 2.4 5.8 12.5 5 4.2 4.3 28 6…A 100- room hotel has an ADR of $120 per room, variable cost of $15 per room and monthly fixed cost of $200,000. The average occupancy rate is equal to 70%. Assume 30 days in a month and 360 days in a year. Find the break-even occupancy %.
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