Principles Of Operations Management
Principles Of Operations Management
11th Edition
ISBN: 9780135173930
Author: RENDER, Barry, HEIZER, Jay, Munson, Chuck
Publisher: Pearson,
Question
Book Icon
Chapter 7, Problem 6P

a)

Summary Introduction

To determine: The graph illustrating the three total cost lines on the same chart.

a)

Expert Solution
Check Mark

Answer to Problem 6P

Graph illustrating the three cost lines:

Principles Of Operations Management, Chapter 7, Problem 6P

Explanation of Solution

Given information:

Refurbishing cost = $800

Cost of making modifications  = $1,100

Purchase of new equipment  = $1,800

Refurbishing labor and material costs = $1.10 / board

Modifications labor and material costs = $0.70 / board

New equipment variable costs = $0.40 / board

Formation of cost lines denoted in the graph:

The cost line is formed by multiplying the labor cost and number of units and summing the value with the process cost. Let ‘Y’ denote the cost line. Let ‘x’ denote the number of units.

Refurbishing cost line (A):

The cost line (A) mentioned in the graph is derived as follows:

Y=Refurbishing cost+(Refurbishing labor cost×Number of units)=800+(1.10×x)=800+1.10x (A)

Modifications cost line (B):

The cost line (B) mentioned in the graph is derived as follows:

Y=Modifications cost+(Modifications labor cost×Number of units)=1,100+(0.70×x)=1,100+0.70x (B)

New equipment cost line (C):

The cost line (C) mentioned in the graph is derived as follows:

Y=New equipment cost+(New equipment labor cost×Number of units)=1,800+(0.40×x)=1,800+0.40x (C)

Calculation of cost at 0 units and arbitrary units of 4,000 using the cost lines (A), (B) and (C):

Refurbishing:

At 0 units:

Y=800+1.10x=800+(1.10×0) =800

At 4,000 units:

Y=800+1.10x=800+(1.10×4,000)=800+4,400=5,200

Modification:

At 0 units:

Y=1,100+0.70x=1,100+(0.70×0)=1,100

At 4,000 units:

Y=1,100+0.70x=1,100+(0.70×4,000)=1,100+2,800=3,900

New equipment:

At 0 units:

Y=1,800+0.40x=1,800+(0.40×0)=1,800

At 4,000 units:

Y=1,800+0.40x=1,800+(0.40×4,000)=1,800+1,600=3,400

The cost values at 0 and 400 units are plotted on the graph.

b)

Summary Introduction

To determine: The alternative to choose when SB company thinks it can sell more than 3,000 boards.

b)

Expert Solution
Check Mark

Answer to Problem 6P

The best alternative when more than 3,000 boards can be sold is alternative 1.

Explanation of Solution

Given information:

Refurbishing cost = $800

Cost of making modifications  = $1,100

Purchase of new equipment  = $1,800

Refurbishing labor and material costs = $1.10 / board

Modifications labor and material costs = $0.70 / board

New equipment variable costs = $0.40 / board

Formation of cost lines:

The cost line is formed by multiplying the labor cost and number of units and summing the value with the process cost. Let ‘Y’ denote the cost line. Let ‘x’ denote the number of units.

Refurbishing cost line:

Y=Refurbishing cost+(Refurbishing labor cost×Number of units)=800+(1.10×x)=800+1.10x (A)

Modifications cost line:

Y=Modifications cost+(Modifications labor cost×Number of units)=1,100+(0.70×x)=1,100+0.70x (B)

New equipment cost line:

Y=New equipment cost+(New equipment labor cost×Number of units)=1,800+(0.40×x)=1,800+0.40x (C)

Calculation of cost at 3,000 boards:

Alternative 1:

Alternative 1 is refurbishing cost calculated by using equation (A)

Y=800+1.10x=800+(1.10×3,000)=800+3,300=4,100

Alternative 2:

Alternative 2 is modifications cost calculated by using equation (B)

Y=1,100+0.70x=1,100+(0.70×3,000)=1,100+2,100=3,200

Alternative 3:

Alternative 3 is new equipment cost calculated by using equation (C)

Y=1,800+0.40x=1,800+(0.40×3,000)=1,800+1,200=3,000

The total cost of alternative 1 is less than alternative 2 and 3 (3000 < 4100, 3200).

Hence, the best alternative for making 3,000 boards is alternative 3.

c)

Summary Introduction

To determine: The alternative to choose when SB company thinks that the market for boards will be between 1,000 and 2,000 boards.

c)

Expert Solution
Check Mark

Answer to Problem 6P

The best alternative when the market for boards will be between 1,000 and 2,000 boards is making modifications.

Explanation of Solution

Given information:

Refurbishing cost = $800

Cost of making modifications  = $1,100

Purchase of new equipment  = $1,800

Refurbishing labor and material costs = $1.10 / board

Modifications labor and material costs = $0.70 / board

New equipment variable costs = $0.40 / board

Formation of cost lines:

The cost line is formed by multiplying the labor cost and number of units and summing the value with the process cost. Let ‘Y’ denote the cost line. Let ‘x’ denote the number of units.

Refurbishing cost line:

Y=Refurbishing cost+(Refurbishing labor cost×Number of units)=800+(1.10×x)=800+1.10x (A)

Modifications cost line:

Y=Modifications cost+(Modifications labor cost×Number of units)=1,100+(0.70×x)=1,100+0.70x (B)

New equipment cost line:

Y=New equipment cost+(New equipment labor cost×Number of units)=1,800+(0.40×x)=1,800+0.40x (C)

Calculation of best alternative:

The best alternative is calculated by equating (A) with (B) and (B) with (C).

Calculation of lower limit value:

Lower limit value is calculated by Equating (A) with (B):

800+1.10x=1,100+0.70x1.10x-0.70x=1,100-8000.4x=300

x=3000.4x=750 units

Calculation of Upper limit value:

Upper limit value is calculated by Equating (B) with (C):

1,100+0.70x=1,800+0.40x0.70x-0.40x=1,800-1,1000.3x=700

x=7000.3x=2,333 units

The boards must be in the range of 1,000 to 2,000. Hence, the best alternative is making major modifications.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Menu Item Sales and Cost Data Taco Salad: Number Sold: 127; Item Cost: $0.71; Selling Price: $3.25 Lasagna: Number Sold: 48; Item Cost: $0.92; Selling Price: $4.67 Chicken: Number Sold: 31; Item Cost: $1.20; Selling Price: $3.00 Green Beans: Number Sold: 14; Item Cost: $0.20; Selling Price: $1.00 Corn: Number Sold: 13; Item Cost: $0.24; Selling Price: $1.00 Rice: Number Sold: 9;Item Cost: $0.13; Selling Price: $1.00 Menu Item Classification: Low contribution margin, low menu mix % DOG High contribution margin, low menu mix % PUZZLE Low contribution margin, high menu mix % PLOWHORSE High contribution margin, high menu mix o/o STAR QUESTION 1 Complete the menu analyses worksheet below. Calculations will be done using the information above. Restaurant: Date: MealPeriod: (A) ☐ (B) (C) (D) (E) (F) (G) (H) (1) (J) Menu Mix Popularity % Item Item Sold/(Menu Mix Menu Menu Item Food Menu Contribution Contribution Contribution Category Item Mix %): (B/K) Cost Selling Margin Price Margin (E-D)…
1) Around the Clock Production of Fire Nozzles View the videos Around the Clock Production of Fire Nozzles 1  https://media.gaspar.mheducation.com/GASPARPlayer/play.html?id=132KoZwS0yMEgsToDUsZjJe (9.44 minutes, Ctrl+Click on the link) and Around the Clock Production of Fire Nozzles 2 https://media.gaspar.mheducation.com/GASPARPlayer/play.html?id=44JM0cKtFLqHP5bad6KOHAm (7.43 minutes, Ctrl+Click on the link); what are your key takeaways (tie to one or more of the topics discussed in Chapters 12 and/or 13) after watching these videos. Note: As a rough guideline, please try to keep the written submission to one or two paragraphs.   2) Cyberdyne Systems stocks and sells Cyberdyne glucose meters. The firm gathered the following information from its South Pasadena office:   Demand = 19,500 units per year Ordering cost = $25 per order Holding cost = $4 per unit per year   The firm’s operations manager wants to calculate the:   a) EOQ for the glucose meters. b) Annual holding costs for the…
In the following problems assume, unless otherwise stated, that S = $40, σ = 30%, r =8%,and δ =0. 13.1 Suppose you sell a 45-strike call with 91 days to expiration. What is delta? If the option is on 100 shares, what investment is required for a delta-hedged portfolio? What is your overnight profit if the stock tomorrow is $39? What if the stock price is $40.50?

Chapter 7 Solutions

Principles Of Operations Management

Ch. 7.S - Prob. 11DQCh. 7.S - Prob. 12DQCh. 7.S - What are the techniques available to operations...Ch. 7.S - Amy Xias plant was designed to produce 7,000...Ch. 7.S - For the post month, the plant in Problem S7.1,...Ch. 7.S - Prob. 3PCh. 7.S - Prob. 4PCh. 7.S - Prob. 5PCh. 7.S - The effective capacity and efficiency for the next...Ch. 7.S - Southeastern Oklahoma State Universitys business...Ch. 7.S - Prob. 8PCh. 7.S - Prob. 9PCh. 7.S - Prob. 10PCh. 7.S - The three-station work cell illustrated in Figure...Ch. 7.S - The three-station work cell at Pullman Mfg., Inc....Ch. 7.S - The Pullman Mfg., Inc., three-station work cell...Ch. 7.S - Prob. 14PCh. 7.S - 10 minutes per unit. Part 2 is simultaneously...Ch. 7.S - Prob. 16PCh. 7.S - Prob. 17PCh. 7.S - Using the data in Problem S7.17: a) What is the...Ch. 7.S - Prob. 19PCh. 7.S - Prob. 20PCh. 7.S - Prob. 21PCh. 7.S - Prob. 22PCh. 7.S - Prob. 23PCh. 7.S - Prob. 24PCh. 7.S - Prob. 25PCh. 7.S - Prob. 26PCh. 7.S - Prob. 27PCh. 7.S - Prob. 28PCh. 7.S - Prob. 29PCh. 7.S - Prob. 30PCh. 7.S - Prob. 31PCh. 7.S - Prob. 32PCh. 7.S - Prob. 33PCh. 7.S - Prob. 34PCh. 7.S - Prob. 35PCh. 7.S - Prob. 36PCh. 7.S - Prob. 37PCh. 7.S - Prob. 38PCh. 7.S - Prob. 39PCh. 7.S - Prob. 40PCh. 7.S - Prob. 41PCh. 7.S - Prob. 42PCh. 7.S - Prob. 43PCh. 7.S - Prob. 44PCh. 7.S - Prob. 45PCh. 7.S - Prob. 1VCCh. 7.S - a capacity expansion plan and a new 11-story...Ch. 7.S - a capacity expansion plan and a new 11-story...Ch. 7 - Ethical Dilemma For the sake of efficiency and...Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQCh. 7 - Prob. 11DQCh. 7 - Prob. 12DQCh. 7 - Prob. 13DQCh. 7 - Prob. 14DQCh. 7 - Prob. 15DQCh. 7 - Prob. 16DQCh. 7 - Prob. 17DQCh. 7 - Prob. 18DQCh. 7 - Prob. 19DQCh. 7 - Prob. 1PCh. 7 - Usingthedatain Problem 7.1, determinethemost...Ch. 7 - Prob. 3PCh. 7 - Refer to Problem 7.1. If a contract for the second...Ch. 7 - Stan Fawcetts company is considering producing a...Ch. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Metters Cabinets, Inc., needs to choose a...Ch. 7 - Prob. 10PCh. 7 - Nagle Electric. Inc., of Lincoln, Nebraska, must...Ch. 7 - Stapleton Manufacturing intends to increase...Ch. 7 - Prepare a flowchart for one of the following: a)...Ch. 7 - Prepare a process chart for one of the activities...Ch. 7 - Prob. 15PCh. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 1CSCh. 7 - Prob. 2CSCh. 7 - Prob. 3CSCh. 7 - Process Strategy at Wheeled Coach Wheeled Coach,...Ch. 7 - Prob. 1.2VCCh. 7 - Prob. 1.3VCCh. 7 - Prob. 1.4VCCh. 7 - Alaska Airlines: 20-Minute Baggage...Ch. 7 - Prob. 2.2VCCh. 7 - Prob. 2.3VCCh. 7 - Prob. 2.4VCCh. 7 - Prob. 2.5VCCh. 7 - Prob. 3.1VCCh. 7 - Prob. 3.2VCCh. 7 - Prob. 3.3VCCh. 7 - Prob. 3.4VC
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Text book image
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Text book image
Marketing
Marketing
ISBN:9780357033791
Author:Pride, William M
Publisher:South Western Educational Publishing
Text book image
MARKETING 2018
Marketing
ISBN:9780357033753
Author:Pride
Publisher:CENGAGE L
Text book image
Management, Loose-Leaf Version
Management
ISBN:9781305969308
Author:Richard L. Daft
Publisher:South-Western College Pub
Text book image
Contemporary Marketing
Marketing
ISBN:9780357033777
Author:Louis E. Boone, David L. Kurtz
Publisher:Cengage Learning