Solutions- Chapter 5 Capacity Planning book problems

1.

a.

b.

Utilizatio n

Actual output
7

70%
Design capacity 10

Efficiency

Actual output
7
87.5%
Effective capacity 8

Utilizatio n

Actual output
4
67%
Design capacity 6

Efficiency

Actual output
4
80%
Effective capacity 5

c. This is not necessarily true. If the design capacity is relatively high, the utilization could be
low even though the efficiency was high.

2.

Efficiency

Actual output
80%
Effective capacity

Actual output = .8 (Effective capacity)

Effective capacity = .5 (Design capacity)
Actual output = (.5)(.8)(Effective capacity)
Actual output = (.4)(Design capacity)
Actual output = 8 jobs
Utilization = .4

Utilizatio n

Actual output
Design capacity

Design Capacity

3.

Actual output
8
20 jobs
Effective capacity .4

FC = $9,200/month
VC = $ .70/unit
Rev = $ .90/unit
a.

Q BEP

FC
$9,200

46,000 units
Rev VC $.90 $.70

b. Profit = Rev x Q (FC + VC x Q)

1. P61,000 = $.90(61,000) [$9,200 + $.70(61,000)] = $3,000
2. P87,000 = $.90(87,000) [$9,200 + $.70(87,000)] = $8,200

c.

Specified profit FC $16,000 9,200 / month

126,000 units .
Rev VC
$.90 / unit $.70 / unit

d. Total Revenue = Rev x Q, so Q =

Total Revenue
$23,000

25,556 units
R
$.90 / unit

e.
$100,000

TR = $90,000 @ Q = 100,000 units

TC = $79,200 @ Q = 100,000 units

TR
TC

Cost

$50,000

$9,200
0
Volume
(units)

FC

Rev

VC

A: $40,000

$15/unit

$10/unit

B: $30,000

$15/unit

$11/unit

Q BEP

FC
Rev VC

100,000

4.

a.

Q BEP,A

$40,000
8,000 units
$15 / unit $10 / unit

Q BEP,B

$30,000
7,500 units
$15 / unit $11 / unit

b. Profit = Q(Rev VC) FC

[As Profit]
[Bs Profit]
Q($15 $10) $40,000 = Q($16 $12) $30,000
Solving, Q = 10,000 units
c. PA = 12,000($15 $10) $40,000 = $20,000 [A is higher]
PB = 12,000($16 $12) $30,000 = $18,000
5.

Demand = 30,000 = Q
FC = $25,000
VC = $.37/pen
a. Rev = $1.00/pen

Q BEP

FC
$25,000

39,683 units
Rev VC $1.00 $.37

b. specified profit = $15,000

specified profit FC $15,000 $25,000

30,000
Rev VC
Rev $.37 / unit
Solving for Rev: Rev = $1.71 [rounded up]
Q

Solutions Chapter 8 Location Planning Analysis book problems 1-5

1.

2.

Profit =

(Rev/unit VC/unit)Q FC

Omaha:

($185/unit $36/unit)8,000 units $1,200,000 = $8,000

K.C.:

($185/unit $47/unit)12,000 units $1,400,000 = $256,000

Location
Rev/unit
VC/unit
FC

A
$2.65
1.76
$5,000

B
$2.65
1.76
$5,500

C
$2.65
1.76
$5,800

specified profit + FC
a. Q = Rev/unit VC/unit

A
16,854

B
17,416

C
17,753

b. Profit = (Rev/unit VC/unit)Q FC

$13,690

$14,080

$14,670

$800,000
$14,000
$17,000

$920,000
$13,000
$17,000

3.
FC
VC/unit
Rev/unit

a. TC = VC/unit x Q + FC
[A]
[B]
$14,000Q + $800,000 = $13,000Q + $920,000
Solving, Q = 120 units
b. A: 0 to 119
B: 121 or more
A

2,500

$50,000
1,000

4.
FC/year
VC/unit

$250,000
500

a. 500
A (new location)

400
TC
($000)

300

[250]

C (expansion)
200 B (subcontract)
100

[50]
0

33.3
B

100

200

300

400
A

No. of Boats/yr.

Solutions (continued)
b. C (from graph)
c. Subcontracting prices are probably more precise, subcontracting provides another source of
supply. Expansion would allow more control and flexibility.

5.
FC

A
$254,000

B
$25,000

C
$120,000

500

2,500

1,000

VC/unit

TC = VC/unit x Q + FC
A: $500(150) + $254,000 = $329,000
B: $2,500(150) + $25,000 = $400,000
C: $1,000(150) + $120,000 = $270,000*

9.

Factor
1. Conv. access

Wt.
.15

A
.15(80) = 12.00

B
C
.15(70) = 10.50 15(60) = 9.0

2. Parking

.20

.20(72) = 14.40

.20(76) = 15.20 .20(92) = 18.4

3. Display area

.18

.18(88) = 15.84

.18(90) = 16.20 .18(90) = 16.2

4. Shopper traffic

.27

.27(94) = 25.38

.27(86) = 23.22 .27(80) = 21.6

5. Operating costs
6. Neighborhood

.10
.10

.10(98) = 9.80
.10(96) = 9.60

.10(90) = 9.00
.10(85) = 8.50

.10(82) = 8.2
.10(75) = 7.5

1.00

87.02

82.62

80.9

On the basis of composite score, A seems the best.

10.

Factor
1. Business Services

Location (a)
A
B
C
9
5
5

2. Community Services

1/9

7/9

6/9

7/9

3. Real Estate Cost

1/9

3/9

8/9

7/9

4. Construction Costs
5. Cost of Living

5
4

6
7

5
8

2/9
1/9

10/9

12/9

10/9

4/9

7/9

8/9

6. Taxes

1/9

5/9

5/9

4/9

7. Transportation

1/9

6/9

7/9

8/9

39

44

44

1.0

53/9

55/9

54/9

Total

Weight
2/9

Location (b)
A
B
18/9 10/9

C
10/9