MGT501 - Operations & Project Management
Week 3
Chapter 7:
Manufacturing process
Exercise 8 and 10 page 163
8. A book publisher has fixed costs of $300,000 and variable costs per book of $8.00. The
book sells for $23.00 per copy.
a. How many books must be sold to break even?
b. If the fixed cost increased, would the new break-even point be higher or lower?
c. If the variable cost per unit decreased, would the new break-even point be higher or lower?
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10. Assume a fixed cost of $900, a variable cost of $4.50, and a selling price of $5.50.
a. What is the break-even point?
b. How many units must be sold to make a profit of $500.00?
c. How many units must be sold to average $0.25 profit per unit? $0.50 profit per unit?
$1.50 profit per unit?
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a. Selling price = $ 5.50 Variable Cost = $ 4.50 Variable Contribution per unit = $ 1.00 Fixed Cost = $
900 Therefore, break - even point = 900/1 = 900 Units b. Fixed Cost = $ 900 Profit Required = $ 500
Total Variable contribution required = 900 + 500 = $ 1,400 Therefore no. of units sold to achieve the
required profit = 1400/1 = 1400 Units c. Variable contribution per unit = $ 1 Share of profit per unit =
$ 0.25 Contribution towards fixed cost per unit = $ 0.75 Therefore, no. of units required to achieve $
0.25 per unit = 900/0.75 = 1200 Units Variable contribution per unit = $ 1 Share of profit per unit = $
0.50 Contribution towards fixed cost per unit = $ 0.50 Therefore, no. of units required...
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Chapter 9:
Service process
Chapter 11:
Process design and analysis
Case Kristen Cookies
Exercise 16 page 294
16. Wally’s Widget Warehouse takes orders from 7 A.M. to 7 P.M. The manager wants to analyze
the process and has provided the following process flow diagram. There are three steps
required to ship a customer order. The first step is to take the order from a customer. The
second step is to pick the order for the customer, and then they have to pack the order to
ready it for shipping. Wally promises that every order placed today gets shipped tomorrow.
That means the picking and packing operations must finish all orders before they go home.
Wally wants to figure out the following:
a. What is the current maximum output of the process assuming that no one works
overtime?
b. How long will the picking and packing operations have to work if we have a day where
the order taker works at his maximum capacity?
c. Given b, what is the maximum number of orders waiting to be picked?
d. Given b, what is the maximum number of orders waiting to be packed?
e. If we double the packing capacity (from 60 to 120 orders per hour), what impact does
this have on your answers in parts (b), (c), and (d)?
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