TUTORIAL 2 16-09-2014

OPERATIONS MANAGEMENT
CHAPTER 7 Process Design | CHAPTER 7S Capacity Planning
PROBLEM 1
Creative Cabinets, Inc., needs to choose a production method for its new office shelf, the Maxistand. To
help accomplish this, the firm has gathered the following production cost data:

Process Type

Annualized Fixed Cost of

Variable Costs (per unit) ($)

Plant & Equipment ($)

Labor

Material

Energy

Mass Customization

1,260,000

30

18

12

Intermittent

1,000,000

24

26

20

Repetitive

1,625,000

28

15

12

Continuous

1,960,000

25

15

10

Creative Cabinets projects an annual demand of 24,000 units for the Maxistand. The Maxistand will
sell for $120 per unit.
a. Which process type will maximize the annual profit from production the Maxistand?
b. What is the value of this annual profit?
PROBLEM 2 (MID-TERM 2013)
As a prospective owner of a club known as the Red Rose, you are interested in determining the
volume of sales dollars necessary for the coming year to reach the break-even point. You have decided
to break down the sales for the club into four categories, the first category being beer. Your estimate
of the beer sales is that 50,000 drinks will be served. The selling price for each unit will average $2;
the cost is $1. The second major category is meals, which you expect to be 15,000 units, but with an
average price of $10 and a cost of $6. The third major category is desserts and wine, of which you also
expect to sell 10,000 units, but with an average price of $3 per unit sold and a cost of $2 per unit. The
final category is lunches and inexpensive sandwiches, which you expect to total 30,000 units at an
average price of$6.5 with a food cost of $3.5. Your fixed cost (rent, utilities, and so on) is $2,000 per
month plus $3,000 per month for entertainment.
a. What is your break-even point in dollars per month?
b. What is the expected number of meals each day if you are open 30 days a month?

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PROBLEM 3 (UTS 2014)

Cepat Beres Shop is a specialized repair shop for trucks. This shop has a repairing capacity of 800
trucks per month. Because of maintenance for equipment and machinery should be scheduled every
month, the owner of PT Cepat Beres feels that his shop is only capable of repairing up to 600 trucks
per month. Last month, 2 employees left the shop for a few days, so that only 400 trucks were
completely repaired. What is the utilization and efficiency of the Cepat Beres Shop?
PROBLEM 4
A production process at Kenneth Day Manufacturing is shown in figure below. The drilling operation
occurs separately from, and simultaneously with, the sawing and sanding operations. A product needs
to go through only one of the three assembly operations (the operations are in parallel).

a. Which operation is the bottleneck?

b. What is the process time of the overall system?
c. What is the process cycle time of the overall system?
d. If the firm operates 8 hours per day, 20 days per month, what is the monthly capacity of the
manufacturing process?
e. Suppose that a second welding machine is added, and it has the same process time as the original
welding machine.
(i) What is the new process time of the system?
(ii) What is the new process cycle time?

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