Chapter 06 - Production Process
CHAPTER 06
PRODUCTION PROCESSES
8. a. FC = (P - VC) * Break-even (where FC = fixed cost, P = price, and VC = variable cost).
$900 = ($5.50 - $4.50) * Break-even
Break-even = 900 units.
b. FC + profit = (P - VC) * V
(where FC = fixed cost, P = price, and VC = variable cost, and V = Volume)
$900 + $500 = ($5.50 - $4.50) * V
V = 1400 units.
c.
$0.25 Profit per unit = (P-VC)*V - FC)/V
$.25 = (($5.50 - $4.50)*V - $900)/V
.25V = V - 900
.75V = 900
V = 1,200 units.
a. $0.50 Proit per unit = ((P-VC)*V - FC)/V
$.50 = (($5.50 -$4.50)*V - $900)/V
.50V = V - $900
.50V = 900
V = 1,800 units.
c. $1.50 Profit per unit = ((P-VC)*V - FC)/V
$1.50 = (($5.50 -$4.50)*V - $900)/V
1.5V = V - 900
.50V = -900
V = -1,800 units. Not possible.
10. a. FC = (Pc - VCc) * Vc + (Pb -VCb) * Vb
where
FC = fixed cost
Pi = price for product i
VCi = variable cost for product i
Vi = volume for product i
where i is
c = chair
b = bar stool
V = Vc = Vb
$20,000 = ($50 - $25) * V + ($50 - $20) * V
20,000 = 25V + 30 V
20,000 = 55V
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Chapter 06 - Production Process
V = 364 units of chairs and bar stools.
Break-even in dollars = $50(364 + 364) = $36,400.
b.
FC = (Pc - VCc) * Vc + (Pb -VCb) * Vb
where
FC = fixed cost
Pi = price for product i
VCi = variable cost for product i
Vi = volume for product i
where i is
c = chair
b = bar stool
V = Vc = 4Vb
$20,000 = ($50 - $25) * V + ($50 - $20) *4V
20,000 = 25V + 120 V
20,000 = 145V
V = 138 units of chairs and (4 * 138) = 552 bar stools.
Break-even in dollars = $50(138 + 552) = $34,500.
15.
a.
throughput time (time to covert raw material into product)
Throughput time decreases as you move from a job shop to flow shop environment.
b.
capital/labor intensity
Capital intensity increases as you move to a flow shop (need for more machinery). Labor intensity
(assuming you mean # of workers) would probably increase as well (depends on the level of
automation). Ratio would increase in a flow shop because capital requirements are so much
greater.
c.
bottlenecks
Would probably decrease in a flow shop.
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