Problem 1:

In a job shop, effective capacity is only 60% of design capacity, and actual output is 70% of effective capacity output. Hints:

Utilization = Actual output/Design capacity

Efficiently = Actual Output/ Effective capacity

(i) What is the ratio of Actual Output over the Design Capacity?

(Hints: Actual output / Design capacity)

(ii) What design capacity would be needed to be achievedusing the above datafor actual (actual/design) output (obtained above) of eight jobs per week?

(Hints: Actual/ Design = # of jobs / Design capacity)

Problem 2:

Afurniture manufacturing company received the demand forecast of an office item from its marketing department. The manufacturer plans to produce entire forecasted quantity (Q_f) of4,000 unitsfor the upcoming month. Fixed cost of $20,000 per month is allocated to produce the items, and the variable cost is $11 per item.

Q_BEP = FC/Rev - VC

Hints:

i) Find the break even quantity (Q_bep) if the item sells for $15 each.

ii) What quantity is the smart choice for manufacturer to plan for production?

Hints: look at forecast and break even quantity.

iii) At what price the item must be sold to obtain a monthly profit of $4,000, assuming that entire products will besold irrespective of the quantities (either Q_for Q_bep) produced?

Hints: Profit= Q_f(R-v)-FC  and/orProfit= Q_bep(R-v)-FC 

iv) Recommend which quantity (Q_F or Q_bep)the manufacturer should plan to produce in order to make the profit $4000.

Hints: Look at the selling price for either case.

v) Comment: whatare the risks, and what is the gain?

Problem 3:

Why it is important to match process capabilities with product's market demand? What are the risks and what is the benefit?