Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134855424
Author: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
Publisher: PEARSON
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Textbook Question
Chapter 4, Problem 22P
Acme Steel Fabricators experienced booming business for the past 5 years. The company fabricates a wide range of steel products, such as railings, ladders, and light structural steel framing. The current manual method of materials handling is causing excessive inventories and congestion. Acme is considering the purchase of an overhead rail-mounted hoist system or a forklift truck to increase capacity and improve manufacturing efficiency.
The annual pretax payoff from the system depends on future demand. If demand stays at the current level, the probability of which is 0.50, annual savings from the overhead hoist will be $10,000. If demand rises, the hoist will save $25,000 annually because of operating efficiencies in addition to new sales. Finally, if demand falls, the hoist will result in an estimated annual loss of $65,000. The probability is estimated to be 0.30 for higher demand and 0.20 for lower demand.
If the forklift is purchased, annual payoffs will be $5,000 if demand is unchanged, $10,000 if demand rises, and
- Draw a decision tree for this problem and compute the expected value of the payoff for each alternative.
- Which is the best alternative, based on the expected values?
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Borges Machine Shop, Inc. has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle Owner Luis Borges hopes the contract will be extended and the volume increased next year
Borges has developed costs for three alternatives. They are general-purpose equipment (GPE), flexible manufacturing system (FMS), and expensive, but efficient, dedicated machine (DM) The cost data follow
Annual contracted units
Annual fixed cost
General Purpose
Equipment (GPE)
200.000
$150.000
$15.00
Per unit variable cost
The option GEE is best when the contracted volume is below units (enter your response as a whole number)
Flexible Manufacturing
System (FMS)
200,000
$250.000
$14.00
Dedicated
Machine (DM)
200.000
$525,000
$13.00
Northeast Pennsylvania Manufacturing Company has
purchased a certain component part from Wilkes Part
Company for $80 per part. Recently, improvements in
operations and reduce product demand have cleared up
in
some
сарacity
Northeast
Pennsylvania
Manufacturing's own plant for producing component
parts. The particular part could be produced at $50 per
part, with a fixed cost of $200,000. As another
alternative, a new supplier, Scranton Part Company, is
offering volume discounts for new customers of $90 per
part for the first 1,600 parts ordered and $70 per part for
each additional unit ordered. At what volume would
each of the alternatives be preferred?
Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the contract will be extended
and the volume increased next year. Borges has developed costs for three alternatives. They are general-purpose equipment (GPE), flexible manufacturing system (FMS), and
expensive, but efficient, dedicated machine (DM). The cost data follow:
Flexible Manufacturing
System (FMS)
General-Purpose
Equipment (GPE)
200,000
Annual contracted units
Annual fixed cost
$150,000
Per unit variable cost
$18.00
The option GPE is best when the contracted volume is below units (enter your response as a whole number).
200,000
$250,000
$14.00
Dedicated
Machine (DM)
200,000
$525,000
$13.00
Chapter 4 Solutions
Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (12th Edition)
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