Operations Management: Sustainability and Supply Chain Management (12th Edition)
Operations Management: Sustainability and Supply Chain Management (12th Edition)
12th Edition
ISBN: 9780134130422
Author: Jay Heizer, Barry Render, Chuck Munson
Publisher: PEARSON
Question
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Chapter 5, Problem 24P

a)

Summary Introduction

To determine: The best decision when Company R is assumed to possess the semiconductor.

Introduction: Expected monetary value (EMV) is a calculation system for expected returns for the certain decision made by a company.

b)

Summary Introduction

To determine: The criteria used in decision making.

c)

Summary Introduction

To determine: The worst and the best outcomes to Company R because of the decision made.

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QUESTION #1 Mrs. Johnson, the owner of a small manufacturing business has patented a new device for kitchen appliance. Before trying to commercialize the device and add it to her existing product line, the she wants reasonable assurance of success. Variable costs are estimated at $8 per unit produced and sold. Fixed costs are about $60,000 per year. a. Forecasted sales for the first year are 15,000 units if the price is reduced to $20. With this pricing strategy, what would be the product's total contribution to profits in the first year? b. If the selling price is set at $30, how many units must be produced and sold to break even? Use both algebraic and graphic approaches
Q The manager of a fast food restaurant featuring hamburgers is adding salads to the menu. For each of the two new options, the price to the customer will be the same. The MAKE option is to install a salad bar stocked with vegetables, fruits and toppings and let the customer assemble the salad. The salad bar would have to be leased and a part-time employee hired. The manager estimates the fixed cost at $12000 and variable costs totalling $1.5 per salad. The BUY option is to have pre-assembled salads available for sale. They would be purchased from a local supplier at $2 per salad. However, offering pre-assembled salads would require installation and operation of additional refrigeration, with fixed annual cost of $2400.  What is the rational decision if A) the manager expects to sell 25000 salads per year and B) the manager expects to sell 18000 salads
QUESTION 2 Searching for ways to cut costs and increase profit, one of the industrial engineers at Home Comfort Furniture Manufacturers, Inc. determined that the equivalent annual worth of an existing machine over its remaining useful life of 2 years is $-65,000 per year. The IE also determined that used machines like the one currently in use are not available any longer, but the defender can be replaced with a challenger that is more advanced. It will have an AW of $-78,550 if it is kept for 2 years or less, $-72,075 if it is kept between 3 and 4 years, and $-65,000 if it is kept for 5 to 10 years. If the company uses a specified 3-year planning horizon and an interest rate of 14% per year. Using Replacement Study, select: a. Replace now with challenger for all 3 years b. Keep the defender for 2 years and then replace it with the challenger for 1 year c. Keep the defender for 1 years and then replace it with the challenger for 2 years

Chapter 5 Solutions

Operations Management: Sustainability and Supply Chain Management (12th Edition)

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