What is the economic production quantity

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Reference no: EM131210849

Q1) An executive conference center has the physical ability to handle 1,100 participants. However, conference management personnel believe that only 1,000 participants can be handled effectively for most events. The last event, although forecasted to have 1,000 participants, resulted in the attendance of only 950 participants. What are the utilization and efficiency of the conference facility?

Utilization = 

Efficiency =

Q2) A product is currently made in a process-focused shop, where fixed costs are $8,000 per year and variable cost is $40 per unit. The firm currently sells 200 units of the product at $200 per unit. A manager is considering a repetitive focus to lower costs (and lower prices, thus raising demand). The costs of this proposed shop are fixed costs = $24,000 per year and variable costs = $10 per unit. If a price of $80 will allow 400 units to be sold, what profit (or loss) can this proposed new process expect? Do you anticipate that the manager will want to change the process? Explain. 

Q3) Jason Smith, the owner of PizzaHut restaurant near JSU, is considering a new oven in which to bake the restaurant's signature dish, vegetarian pizza. Oven type A can handle 25 pizzas an hour. The fixed costs associated with oven A is $22,000 and the variable costs are $2.5 per pizza. Oven type B is larger and can handle 40 pizzas an hour. The fixed costs with oven B are $35,000 and variable costs are $1.5 per pizza. The both pizzas sell for $15 each. 

a) What is the break-even point for each oven?

b) If the owner expects to sell 9,500 pizza, which oven should the owner purchase?

c) If the owner expects to sell 13,700 pizza, which oven should the owner purchase?

d) At what volume should the owner switch ovens?

Q4) The owner of a millwork shop is considering three alternative locations for a new plant for building embossed-and-clad steel exterior doors for residences. Fixed and variable costs follow. Since the plant ships nationwide, revenue is assumed the same regardless of plant location. Identify the range over which each location is best.















Step 1. Formulate Total Cost (TC) functions for each option.

Step 2. Draw a graph with the total cost functions.

Step 3. Compute the cross-over points.

Step 4. Analyze the cases and determine the best option for specific quantity ranges. (Please state which option is preferred in a quantity range, and which option is never preferred.)

Q5) The following flow chart shows an inspection process to receive goods in a warehouse.


(a) Where is a bottleneck process?

(b) What is the bottleneck time?

(c) What is the throughput time for good items?

(d) What is the throughput time for wrong orders?

(e) What is the throughput time for poor quality items?

(f) If we get 15 orders in an 8 hour day, what would the utilization rate be at inspection station?

Q6) Montegut Manufacturing produces a product for which the annual demand is 10,000 units. Production averages 100 units per day, while demand is 40 units per day. Holding costs are $2.00 per unit per year, and setup cost is $200.00.

(a) What is the Economic Production Quantity (EPQ)?

(b) What is the maximum inventory level?

(c) How many order cycles (= production runs) are there per year?

(d) What are the total annual holding and setup costs?

Reference no: EM131210849

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