Operations Management
Operations Management
11th Edition
ISBN: 9780132921145
Author: Jay Heizer
Publisher: PEARSON
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Chapter 5, Problem 3CS
Summary Introduction

Case summary:

Company D is a plumbing, heating and air-conditioning company. The company has a simple but powerful strategy. The main goal of the company is their customer satisfaction. The firm offers 24 hours service for 7 days a week with no extra charges.

Company D guarantees price for their work and offers guarantee for all parts for one year. The company does not charge travel charges. The company highly concentrates on customer satisfaction rather than wealth creation.

The company does selective hiring, training and education, performance and compensation to concentrate on customer satisfaction. The company charges premium price but has high customer response due to the value they promise. The revenue has increased from $200,000 to $3.3 million.

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  • Company D

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Problem 16-11 (Algo) One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The supplier has bid $0.10 per part, given a forecast you provided of 100,000 parts in year 1; 300,000 in year 2; and 500,000 in year 3. Shipping and handling of parts from the supplier's factory is estimated at $0.01 per unit. Additional inventory handling charges should amount to $0.003 per unit. Finally, administrative costs are estimated at $30 per month. Although your plant is able to continue producing the part, the plant would need to invest in another molding machine, which would cost $20,000. Direct materials can be purchased for $0.05 per unit. Direct labor is estimated at $0.04 per unit for wages plus a 50 percent surcharge for benefits and, indirect labor is estimated at $0.011 per unit plus 50 percent benefits. Up-front engineering and design costs will amount to $50,000. Finally, management has insisted that overhead be…
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