Principles Of Operations Management
Principles Of Operations Management
11th Edition
ISBN: 9780135173930
Author: RENDER, Barry, HEIZER, Jay, Munson, Chuck
Publisher: Pearson,
bartleby

Concept explainers

Question
Book Icon
Chapter 7.S, Problem 20P

a)

Summary Introduction

To determine: The break-even point of each oven given.

Introduction:

Break-even point (BEP):

The break-even point is measured in units or in sales term to identify the point in a business which is required to cover the total investment costs. The total profit at break-even point is zero.

a)

Expert Solution
Check Mark

Answer to Problem 20P

The break-even point of oven type A is 1,667 pizzas. The break-even point of oven type B is 2,353 pizzas.

Explanation of Solution

Given information:

Oven type A:

Number of pizzas = 20 / hour

Fixed cost = $20,000

Variable cost = $2.00 / pizza

Selling price= $14.00/ pizza

Oven type B:

Number of pizzas = 40 / hour

Fixed cost = $30,000

Variable cost = $1.25 / pizza

Selling price = $14.00 / pizza

Formula to calculate Break-even point (BEP):

BEP=Fixed costSelling priceVariable cost

Calculation of Break-even point (BEP) of oven type A:

The break-even cost of an oven is calculated by finding out the number of pizzas that an oven can cook.

The break-even point is calculated by dividing the fixed cost with the difference of selling price and variable cost.

BEPA=$20,000$14$2.00=$20,000$12=1666.67or1,667 pizzas

Hence, the Break-even point (BEP) for oven type A is 1,667 pizzas.

Calculation of Break-even point (BEP) of oven type B:

The Break-even point is calculated by dividing the fixed cost with the difference of selling price and variable cost.

BEPB=$30,000$14$1.25=$30,000$12.75=$2,352.94 or 2,353 pizzas

Hence, the Break-even point (BEP) for oven type B is 2,353 pizzas.

b)

Summary Introduction

To determine: The oven that need to be purchased if the owner is expecting to sell 9,000 pizzas.

b)

Expert Solution
Check Mark

Answer to Problem 20P

The oven that needs to be purchased if the owner is expecting to sell 9,000 pizzas is oven type A.

Explanation of Solution

Given information:

Oven type A:

Number of pizzas = 20 / hour

Fixed cost = $20,000

Variable cost = $2.00 / pizza

Selling price = $14.00 / pizza

Oven type B:

Number of pizzas = 40 / hour

Fixed cost = $30,000

Variable cost = $1.25 / pizza

Selling price = $14.00 / pizza

Formula to calculate Profit:

Profit=(Number of selling pizzas×Selling price)(Number of selling pizzas×Variable cost)Fixed cost

Calculation of profit for oven type A:

The profit is calculated by multiplying number of selling pizzas with selling price and the resultant value is subtracted from the fixed cost and the value obtained by multiplying number of selling pizzas and variable cost.

Profit=(9,000×14.00)(9,000×2.00)20,000=126,00018,00020,000=88,000

The profit for oven type A is $88,000.

Calculation of profit for oven type B:

The profit is calculated by multiplying number of selling pizzas with selling price and the resultant value is subtracted from the fixed cost and the value obtained by multiplying number of selling pizzas and variable cost.

Profit=($9,000×$14.00)($9,000×$1.25)$30,000=$126,000$11,250$30,000=$84,750

The profit for oven type B is $84,750.

The profit of oven type A is more than oven type B. (88,000 > 84,750)

Hence, the owner must purchase type A oven.

c)

Summary Introduction

To determine: The oven that need to be purchased if the owner is expecting to sell 12,000 pizzas.

c)

Expert Solution
Check Mark

Answer to Problem 20P

The oven that needs to be purchased if the owner is expecting to sell 12,000 pizzas is oven type A.

Explanation of Solution

Given information:

Oven type A:

Number of pizzas = 20 / hour

Fixed cost = $20,000

Variable cost = $2.00 / pizza

Selling price = $14.00 / pizza

Oven type B:

Number of pizzas = 40 / hour

Fixed cost = $30,000

Variable cost = $1.25 / pizza

Selling price = $14.00 / pizza

Formula to calculate Profit:

Profit=(Number of selling pizzas×Selling price)(Number of selling pizzas×Variable cost)Fixed cost

Calculation profit for oven type A:

The profit is calculated by multiplying number of selling pizzas with selling price and the resultant value is subtracted from the fixed cost and the value obtained by multiplying number of selling pizzas and variable cost.

Profit=($12,000×$14.00)($12,000×$2.00)$20,000=$168,000$24,000$20,000=$124,000

The profit for oven type A is $124,000.

Calculation profit for oven type B:

The profit is calculated by multiplying number of selling pizzas with selling price and the resultant value is subtracted from the fixed cost and the value obtained by multiplying number of selling pizzas and variable cost.

Profit=($12,000×$14.00)($12,000×$1.25)$30,000=$168,000$15,000$30,000=$123,000

The profit for oven type B is $123,000.

The profit of oven type A is more than oven type B. (124,000 > 123,000)

Hence, the owner must purchase type A oven.

d)

Summary Introduction

To determine: The volume of pizzas at which JE person must switch the ovens.

d)

Expert Solution
Check Mark

Answer to Problem 20P

The volume of pizzas at which JE person must switch the type of ovens is 13, 333 pizzas.

Explanation of Solution

Given information:

Oven type A:

Number of pizzas = 20 / hour

Fixed cost = $20,000

Variable cost = $2.00 / pizza

Selling price = $14.00 / pizza

Oven type B:

Number of pizzas = 40 / hour

Fixed cost = $30,000

Variable cost = $1.25 / pizza

Selling price = $14.00 / pizza

Let FA be the fixed cost for oven type A.Let VA be the variable cost for oven type A.Let FB be the fixed cost for oven type B.

Let VB be the variable cost for oven type BLet x be the volume of pizzas.

Formation of equation 1 for oven type A:

FA+(VA×x) (1)

Formation of equation 2 for oven type B:

FB+(VB×x) (2)

Calculation of volume of pizzas:

The volume of pizzas is calculated by substituting all the known values in equation (1) and (2) and equating each other.

FA+(VA×x)=FB+(VB×x)$20,000+($2.00×x)=$30,000+(1.25×x)$20,000+2x=$30,000+1.25x2x1.25x=$30,000$20,000

0.75x=$10,000x=$10,0000.75=13,333.33 or 13,333 pizzas

Hence, the volume of pizzas at which JE person must switch the type of ovens is 13, 333 pizzas.

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
Spartan Castings must implement a manufacturing process that reduces the amount of particulates emitted into the atmosphere. Two processes have been identified that provide the same level of particulate reduction. The first process is expected to incur $350,000 of fixed cost and add $50 of variable cost to each casting Spartan produces. The second process has fixed costs of $150,000 and adds $90 of variable cost per casting.a. What is the break-even quantity beyond which the first process is more attractive?b. What is the difference in total cost if the quantity produced is 10,000?
Janelle Heinke, the owners of Ha'Peppas, is consid-ering a new oven in which to bake the firm's signature dish, vegetarian pizza. Oven type A can handle 20 pizzas an hour. The fixed costs associated with oven A are $20,000 and the vari-able costs are $2.00 per pizza. Oven B is larger and can handle 40 pizzas an hour. The fixed costs associated with oven B are $30,000 and the variable costs are $1.25 per pizza. The pizzas sell for $14 each. a) What is the break-even point for each oven? b) If the owner expects to sell 9,000 pizzas, which oven should she purchase? c)If the owner expects to sell 12,000 pizzas, which oven should she purchase? d) At what volume should Janelle switch ovens?
Janelle Heinke, the owner of Ha'Peppas!, is considering a new oven in which to bake the firm's signature dish, vegetarian pizza. Oven type A can handle 22 pizzas an hour. The fixed costs associated with oven A are $20,000 and the variable costs are $3.00 per pizza. Oven B is larger and can handle 42 pizzas an hour. The fixed costs associated with oven B are $30,000 and the variable costs are $1.25 per pizza. The pizzas sell for $12.00 each. a) The break-even point in units for oven type A = units (round your response to the nearest whole number). The break-even point in units for oven type B = units (round your response to the nearest whole number). b) If Janelle is expecting that the pizza shop is going to be able to sell 8,000 pizzas, then she should select oven c) If Janelle is expecting that the pizza shop is going to be able to sell 12,000 pizzas, then she should select oven d) The volume at which Oven A and Oven B have the same cost (crossover point) and Janelle would be…

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
Operations Management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,