Group I- Module 2 - Assignment 2(2)

Module 2- Assignment 2 Discussion case questions and problems Due Date: May 23, 2016

Prepared for: Laurentian University- COMM 2055 Operations Management Professor: Sean Romenco

Table of Contents Case question -“Shoes for Moos,” page 160............................................................................ 3 Chapter 5, Problem 8, page 155........................................................................................... 3 Chapter 5, Problem 17, page 157.......................................................................................... 5 1 | Page

Chapter 6, Problem 6, page 230........................................................................................... 7 Chapter 6, Problem 11, page 231.......................................................................................... 8 Chapter 6, Problem 15, page 232.......................................................................................... 9

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Case question -“Shoes for Moos,” page 160 a) How many shoes per year must Jim sell to break even? Q BEP = FC/(R − v). FC = (10,000/5) + 1,000 + 10,000 = $13,000.00 Q BEP = FC/R-v = 13,000/40-20 = 650 shoes

b) What is the annual cost at the BEP found in part a? FC + VC = 13,000 + (650 x 20) = 26,000.00

c) If Jim could sell 2,000 shoes per year, should he go ahead with this venture? Why? Q = 2,000 P = Q (R-v) – FC = 2000 (40 – 20) – 13,000 = 27,000 Jim should go ahead with this venture if he could sell 2000 shoes as profit would be $27,000.00.

Chapter 5, Problem 8, page 155 a) If the manager anticipates an annual demand of 10,000 units, which alternative would be best from a cost standpoint? For 60,000 units, which alternative would be best? Alternative Internal 1 Internal 2 Vendor A Vendor B

Fixed Cost (FC) $200,000.00 $240,000.00 $0 $0

Variable Cost per unit (v) $16.00/unit $14.00/unit $20.00/unit up to 30,000 units $22 for 1000 units or less $18.00 for all units if demand > 1000 units

Vendor C

$0

$21.00 for first 1000 units and $19.00/unit for additional units 3 | Page

Total Cost (TC) for Q =10,000 units Internal 1: 200,000 + (16 x 10000) = 360,000 Internal 2: 240,000 + (14 x 10000) = 380,000 Vendor A: 20 x 10000 = 200,000 Vendor B: 18 x 10000 = 180,000 (best alternative) Vendor C: 21 x 1000 + 19 x 9000 = 192,000 At 10,000 units, the manager should choose vendor B as best alternative. Total Cost (TC) for Q =60,000 units Internal 1: 200,000 + (16 x 60000) = 1,160,000.00 Internal 2: 240,000 + (14 x 60000) = 1,080,000.00 (best alternative) Vendor A: N/A Vendor B: 18 x 60000 = 1,080,000.00 (best alternative) Vendor C: 21 x 1000 + 19 x 59000 = 1,142,000.00 At 60,000 units, the manager can choose internal 2 or vendor B as best alternative.

b) Determine the range for which each alternative is best. Are there any alternatives that are never best? If so, which ones? Units 0 1000 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 110000

Internal 1 200,000 216,000 360,000 520,000 680,000 840,000 1,000,000 1,160,000 1,320,000 1,480,000 1,640,000 1,800,000 1,960,000

Internal 2 240,000 254,000 380,000 520,000 660,000 800,000 940,000 1,080,000 1,220,000 1,360,000 1,500,000 1,640,000 1,780,000

Vendor A 0 20,000 200,000 400,000 600,000 N/A N/A N/A N/A N/A N/A N/A N/A

Vendor B 0 22,000 180,000 360,000 540,000 720,000 900,000 1,080,000 1,260,000 1,440,000 1,620,000 1,800,000 1,980,000

Vendor C 0 21,000 192,000 382,000 572,000 762,000 952,000 1,142,000 1,332,000 1,522,000 1,712,000 1,902,000 2,092,000

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Range(units ) 1-1000 1001-60000 >60000

Best Alternative Vendor A Vendor B Internal 2

Internal 1 and Vendor C are never the best alternatives.

Chapter 5, Problem 17, page 157

Cost of tin cans Purchased Manufactured tin cans @ plant Building expansion Equipment Variable production cost Useful life

Toronto Plant $6.00/case of 48

U.S. Plant $5.00/case

$2.0 Million $12 Million $5.50/case 10 years

a) Calculate the annual fixed cost of the canning line FC = 2,000,000 + 12,000,000 FC = 14,000,000 Annual FC = 14,000,000 / 10 Annual FC = $1,400,000

b) Calculate the annual break-even quantity between buying and making the cans in-house Q BEP = FC/(Vb – Vm) Q BEP = $1,4000,000/($6.00-$5.50) Q BEP = 2,800,000 cases per year Therefore; the break-even quantity between buying and making the cans in-house is 2,800,000 cases per year.

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c) If annual requirements at the Toronto plant was 5 million cases of can, determine which option is better, buying or making

Therefore; based on the above calculation, it is more cost effective to make versus buy as the total cost to make 5 million cans is $28,900,000 versus $30,000,000 to buy.

Make vs. Buy (in 000's)

0.50

1.00

1.50

2.00

2.50

Total Cost of making

3.00

3.50

4.00

4.50

5.00

Total Cost of buying

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Chapter 6, Problem 6, page 230 a) Draw the precedence network .2 B

.9

.2

C

.6 D

F

.1

.1

A

E

.4 G

.2

.3

.7

.2

.1

L

K

J

I

H

b) Assign tasks to workstations. Workstat ion 1

2

3

Time Left 1.5 1.4 1.2 0.3 0.2

Eligib le A&E B&E B C D

Will fit A&E E B C

1.5 0.9 0.7 0.3 0.2 0

D F G H I J

D F G H I

1.5 0.8 0.5 0.3

J K L

J K L

Time

Idle Time

A (.1) B (.2) C (.9) E (.1)

0.2

D (.6) F (.2) G (.4) H (.1) I (.2)

0

J (.7) K (.3) L (.2)

0.3 0.5

c) Percentage idle time= (Sum of idle times per unit/ Nactual x cycle time) x 100

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= [.5/ (3 x 1.5)] x 100= 11.1%

Chapter 6, Problem 11, page 231

Degrees of closeness: A -Absolutely necessary

E Very Important

X -Undesirable

1- 3, 8 (Count=2) 2 - 7 (Count =1) 3- 1, 5, 6, 8 (Count=4) 2nd Priority 4- 5, 8 (Count=2) 5- 3, 4, 7, 8 (Count=4) 3rd Priority 6- 3, 8 (Count=2) 7- 2, 5 (Count=2) 8- 1, 3, 4, 5, 6 (Count=5) 1st Priority

1- 6 (Count=1) 2 – 6, 8 (Count=2) 7- 8 (Count=1) 8- 7 (Count=1)

1 not with 2 2 not with 4 1 not with 7

Floor Plan based on set priorities: 4

3

1

5

8

6

7

2

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Chapter 6, Problem 15, page 232 A 1 C 6 F 7 Department Pairs 1st 2nd 8-7 7-8 8-6 6-8 8-5 5-8 8-4 4-8 8-3 3-8 8-2 2-8 8-1 1-8 7-1 1-7 7-2 2-7 7-3 3-7 7-4 4-7 7-5 5-7 7-6 6-7 6-5 5-6 6-4 4-6 6-3 3-6 6-2 2-6 6-1 1-6 5-4 4-5 5-3 3-5 5-2 2-5 5-1 1-5 4-3 3-4 4-2 2-4 4-1 1-4 3-2 2-3 3-1 1-3 2-1 1-2

B 5 D 4 G 8

E 3 H 2 Work Flow 1st 2nd 0 20 0 20 0 10 20 170 0 200 0 120 0 0 0 0 45 0 20 0 50 0 0 40 40 10 0 10 70 0 40 0 80 35 0 135 180 10 100 10 40 0 5 365 240 110 110 10 0 90 220 140 0 5 0 10

Total

20 20 10 190 200 120 0 0 45 20 50 40 50 10 70 40 115 135 190 110 40 370 350 120 90 360 5 10

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Departmen t

1

2

3

Numb er of loads to:

2 : 3 : 4 : 5 : 6 : 7 : 8 : 1 : 3 : 4 : 5 : 6 : 7 : 8 : 1 : 2 : 4 : 5 : 6 : 7 : 8 :

10

Locati on

Loads*Dist ance

5

H

90

F

10 0 11 0 80

365

B

40

135

C

40

125

D

60

0

E

12 0

140

E

40

10

F

50

H

45

$ 1,575

G

40

$ 4,800

220

H

40

110

G

50

10

F

90

$ 8,800 $ 5,500 $ 900

0

A

Distan ce betwe en Cente rs: G

$ 1,000 $ 550 $ 7,200 $ 14,600 $ 5,400 $ 7,500

D $ 5,600 $ 500

0 35 0 120 0

E

0 0 200

$ 200 10 | P a g e

4

5

6

7

1 : 2 : 3 : 5 : 6 : 7 : 8 : 1 : 2 : 3 : 4 : 6 : 7 : 8 : 1 : 2 : 3 : 4 : 5 : 7 : 8 : 1 : 2 : 3 :

0

F

110 240

H

60

$ 14,400

G

40

F

$ 6,800 $ 700 $ 2,400 $ 4,000

10 0 0 170 5

B

40

E

14 0 60

100

D

40

10

H

40

C

13 0 60

10

G

12 0

80

F

40

40

G

70

70

D

45

10

E

85

20

H

90

180

0

$ 1,300 $ 2,400 $ 1,200

C $ 3,200 $ 2,800 $ 3,150

0

0

$ 850 $ 1,800

G

45 20

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8

4 : 5 : 6 : 8 : 1 : 2 : 3 : 4 : 5 : 6 : 7 :

50

H

40

$ 2,000

0 40 20 0

H

0 0 20 0 0 0 Total

$ 111,125

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