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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

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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 Fixed Cost (FC) Variable Cost per unit (v)

Internal 1 $200,000.00 $16.00/unit

Internal 2 $240,000.00 $14.00/unit

Vendor A $0 $20.00/unit up to 30,000 units

Vendor B $0 $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

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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 Internal 1 Internal 2 Vendor A Vendor B Vendor C

0 200,000 240,000 0 0 0 1000 216,000 254,000 20,000 22,000 21,000 10000 360,000 380,000 200,000 180,000 192,000 20000 520,000 520,000 400,000 360,000 382,000 30000 680,000 660,000 600,000 540,000 572,000 40000 840,000 800,000 N/A 720,000 762,000 50000 1,000,000 940,000 N/A 900,000 952,000 60000 1,160,000 1,080,000 N/A 1,080,000 1,142,000 70000 1,320,000 1,220,000 N/A 1,260,000 1,332,000 80000 1,480,000 1,360,000 N/A 1,440,000 1,522,000 90000 1,640,000 1,500,000 N/A 1,620,000 1,712,000 100000 1,800,000 1,640,000 N/A 1,800,000 1,902,000 110000 1,960,000 1,780,000 N/A 1,980,000 2,092,000

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Range(units

) Best Alternative 1-1000 Vendor A 1001-60000 Vendor B >60000 Internal 2

Internal 1 and Vendor C are never the best alternatives.

Chapter 5, Problem 17, page 157

Toronto Plant U.S. Plant

Cost of tin cans Purchased $6.00/case of 48 Manufactured tin cans @

plant

$5.00/case Building expansion $2.0 Million

Equipment $12 Million

Variable production cost $5.50/case

Useful life 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.

0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

Make vs. Buy

(in 000's)

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Chapter 6, Problem 6, page 230

a) Draw the precedence network

.2 .9 .6

.2

.1 .1 .4

.2 .3 .7 .2 .1

b) Assign tasks to workstations.

Workstat ion Time Left Eligib le Will fit Time Idle Time 1.5 A & E A & E 1 1.4 B & E E A (.1) 1.2 B B B (.2) 0.3 C C C (.9) 0.2 D E (.1) 0.2 1.5 D D 2 0.9 F F D (.6) 0.7 G G F (.2) 0.3 H H G (.4) 0.2 I I H (.1) 0 J I (.2) 0 1.5 J J 3 0.8 K K J (.7) 0.5 L L K (.3) 0.3 L (.2) 0.3 0.5

c) Percentage idle time= (Sum of idle times per unit/Nactual x cycle time) x 100 F D C B E G A H I J K L

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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) 1- 6 (Count=1) 1 not with 2

2 - 7 (Count =1) 2 – 6, 8 (Count=2) 2 not with 4

3- 1, 5, 6, 8 (Count=4) 2nd Priority 7- 8 (Count=1) 1 not with 7

4- 5, 8 (Count=2) 8- 7 (Count=1) 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

Floor Plan based on set priorities:

4 3 1

5 8 6

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Chapter 6, Problem 15, page 232

A B 1 5 C D E 6 4 3 F G H 7 8 2 Department Pairs Work Flow Total 1st 2nd 1st 2nd 8-7 7-8 0 20 20 8-6 6-8 0 20 20 8-5 5-8 0 10 10 8-4 4-8 20 170 190 8-3 3-8 0 200 200 8-2 2-8 0 120 120 8-1 1-8 0 0 0 7-1 1-7 0 0 0 7-2 2-7 45 0 45 7-3 3-7 20 0 20 7-4 4-7 50 0 50 7-5 5-7 0 40 40 7-6 6-7 40 10 50 6-5 5-6 0 10 10 6-4 4-6 70 0 70 6-3 3-6 40 0 40 6-2 2-6 80 35 115 6-1 1-6 0 135 135 5-4 4-5 180 10 190 5-3 3-5 100 10 110 5-2 2-5 40 0 40 5-1 1-5 5 365 370 4-3 3-4 240 110 350 4-2 2-4 110 10 120 4-1 1-4 0 90 90 3-2 2-3 220 140 360 3-1 1-3 0 5 5 2-1 1-2 0 10 10

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Departmen t Numb er of loads to: Locati on Distan ce betwe en Cente rs: Loads*Dist ance 1 2 : 10 A G 10 0 $ 1,000 3 : 5 H 11 0 $ 550 4 : 90 F 80 $ 7,200 5 : 365 B 40 $ 14,600 6 : 135 C 40 $ 5,400 7 : 125 D 60 $ 7,500 8 : 0 E 12 0 2 1 : 0 D 3 : 140 E 40 $ 5,600 4 : 10 F 50 $ 500 5 : 0 6 : 35 H 45 $ 1,575 7 : 0 8 : 120 G 40 $ 4,800 3 1 : 0 E 2 : 220 H 40 $ 8,800 4 : 110 G 50 $ 5,500 5 10 F 90 $

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4 1 : 0 F 2 : 110 3 : 240 H 60 $ 14,400 5 : 10 6 : 0 7 : 0 8 : 170 G 40 $ 6,800 5 1 : 5 B F 14 0 $ 700 2 : 40 E 60 $ 2,400 3 : 100 D 40 $ 4,000 4 : 180 6 : 10 H 13 0 $ 1,300 7 : 40 C 60 $ 2,400 8 : 10 G 12 0 $ 1,200 6 1 : 0 C 2 : 80 F 40 $ 3,200 3 : 40 G 70 $ 2,800 4 : 70 D 45 $ 3,150 5 : 0 7 : 10 E 85 $ 850 8 : 20 H 90 $ 1,800 7 1 : 0 G 2 : 45 3 : 20

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4 : 50 H 40 $ 2,000 5 : 0 6 : 40 8 : 20 8 1 : 0 H 2 : 0 3 : 0 4 : 20 5 : 0 6 : 0 7 : 0 Total $ 111,125

References

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