EBK OPERATIONS MANAGEMENT
EBK OPERATIONS MANAGEMENT
12th Edition
ISBN: 8220100283963
Author: Stevenson
Publisher: YUZU
bartleby

Concept explainers

Question
Book Icon
Chapter 8, Problem 7P

a)

Summary Introduction

To determine: The location that will yield the greatest profit if monthly demand is 200 and 300 cars respectively.

Introduction: Location is where a firm chooses to site its operations. Location decisions can large effects on expenses and incomes. Location choices are normally quite imperative to both substantial and private companies. The area choice directly affects an operation's expenses and also its capacity to serve clients.

a)

Expert Solution
Check Mark

Answer to Problem 7P

The location outside of the city will yield greatest profit if the monthly demand is 200 and location inside the city will yield greatest profit if the monthly demand is 300 cars.

Explanation of Solution

Given Information:

It is given that the fixed monthly costs of location inside the city are $7,000 and location outside the city is $4,700. The variable costs for location inside the city are $30 per car and for location outside is $40. The dealer price per car is $90. The monthly demands are 200 and 300 cars.

Calculate the total profit of location that will yield the greatest profit if the monthly demand is 200.

It is calculated by subtracting dealer price with variable cost and the result is multiplied with monthly demand and the whole result is subtracted with fixed costs.

TotalProfitsLocationCit=[((CostsVariableCosts)×TotalUnits)FixedCosts]=[(($90$30)×200)$7,000]=[($60×200)$7,000]=[$12,000$7,000]=$5,000

TotalProfitsLocationOut=[((CostsVariableCosts)×TotalUnits)FixedCosts]=[(($90$40)×200)$4,700]=[($50×200)$4,700]=[$10,000$4,700]=$5,300

From the results obtained Location Out yield the greatest profit if the monthly demand is 200 with $5,300 compared to Location Cit which is $5,000.

Hence location that will yield the greatest profit if the monthly demand is 200 is Location Out.

Calculate the total profit of location that will yield the greatest profit if the monthly demand is 300.

Given Information:

It is given that the fixed monthly costs of Location Cit are $7,000 and Location Out is $4,700. The variable costs for Location Cit are $30 per car and Location Out is $40. The dealer price per car is $90. The monthly demands are 200 and 300 cars.

It is calculated by subtracting dealer price with variable cost and the result is multiplied with monthly demand and the whole result is subtracted with fixed costs.

TotalProfitsLocationCit=[((CostsVariableCosts)×TotalUnits)FixedCosts]=[(($90$30)×300)$7,000]=[($60×300)$7,000]=[$18,000$7,000]=$11,000

TotalProfitsLocationOut=[((CostsVariableCosts)×TotalUnits)FixedCosts]=[(($90$40)×300)$4,700]=[($50×300)$4,700]=[$15,000$4,700]=$10,300

From the results obtained location city yield the greatest profit if the monthly demand is 300 with $10,300 compared to location city which is $11,000.

Hence, location that will yield the greatest profit if the monthly demand is 300 is location city.

b)

Summary Introduction

To determine: The volume of output with the two locations yield the same monthly profit.

Introduction: Location is where a firm chooses to site its operations. Location decisions can large effects on expenses and incomes. Location choices are normally quite imperative to both substantial and private companies. The area choice directly affects an operation's expenses and also its capacity to serve clients.

b)

Expert Solution
Check Mark

Answer to Problem 7P

The volume of output with the two locations yield the same monthly profit is 230 cars.

Explanation of Solution

Given Information:

It is given that the fixed monthly costs of Location City are $7,000 and Location Out is $4,700. The variable costs for Location Cit are $30 per car and Location Out is $40. The dealer price per car is $90. The monthly demands are 200 and 300 cars.

Calculate the volume of output with the two locations yield the same monthly profit.

TotalProfitsLocationCit=[((CostsVariableCosts)×TotalUnits)FixedCosts]=[(($90$30)×TotalUnits)$7,000]TotalProfitsLocationOut=[((CostsVariableCosts)×TotalUnits)FixedCosts]=[(($90$40)×TotalUnits)$4,700]

The total units are denoted as Q. Solving for Q,

[(Q×($90$30))$7,000]=[(Q×($90$40))$4,700]$60Q$7,000=$50Q$4,700$60Q$50Q=$4,700($7,000)$10Q=$2,300Q=[$2,300$10]=230units

Hence, the volume of output with the two locations yield the same monthly profit is 230 cars.

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
A chain restaurant wants to open a new location. It is considering three (3) potential sites for the new restaurant. One location is downtown, the other location is in the suburbs and the final location is at the city limits. The downtown location will have monthly fixed costs of $9,500 and labor and materials at $3.75 an order. The suburb location will have a monthly fixed cost of $8,200 and labor and materials at $3.00 an order. The city limits locations will have a monthly fixed cost of $5,500 and labor and materials at $3.85 an order. The average price per order is $15.50 A. The restaurant chain's business analyst is using three different demand levels for each location 1,000 units, 800 units and 500 units. Determine the profitable of each potential location using each of the demand levels. B. At what demand level is each potential location most profitable? C. At what demand level is each potential location least profitable?
A local restaurateur, Cho Senn, is considering three options for his new Asian fusic restaurant. Option A - called Midtown - will have annual fixed costs of 42,500 an variable costs of 3.45 per customer. Option B - called Market - will have annual fixed costs of 30,000 and variable costs of 4.40 per customer. Finally Option C - called Mall has annual fixed cost of 19,500 and variable costs of 5.25 per customer. If Mr. Cho averages 8.25 in revenue per customer, what volume is required to breakeven with Option B? Your Answer: - Answer 4
A company that produces pleasure boats has decided to expand one of its lines. Current facilities are insufficient to handle the increased workload, so the company is considering two alternatives, A (new location), B (expand existing facilities). Alternative A would involve fixed costs of $250,000 per year, and variable costs would be $500 per boat. Alternative B would require an annual fixed cost of $50,000 and a variable cost of $1,000 per boat. a. At what volume of output would the two locations have the same total cost? b. Which alternative would yield the lowest total cost for an expected annual volume of 150 boats? Formulas: Total Cost= FC + VQ Total Profit= Q (R-V) - FC
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,
Text book image
Operations Management
Operations Management
ISBN:9781259667473
Author:William J Stevenson
Publisher:McGraw-Hill Education
Text book image
Operations and Supply Chain Management (Mcgraw-hi...
Operations Management
ISBN:9781259666100
Author:F. Robert Jacobs, Richard B Chase
Publisher:McGraw-Hill Education
Text book image
Business in Action
Operations Management
ISBN:9780135198100
Author:BOVEE
Publisher:PEARSON CO
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
Production and Operations Analysis, Seventh Editi...
Operations Management
ISBN:9781478623069
Author:Steven Nahmias, Tava Lennon Olsen
Publisher:Waveland Press, Inc.