1. AudioCables, Inc, is currently manufacturing an adapter that has a variable cost of $.50 per unit and a selling price of $1.00 per unit. Fixed costs are $14,000. Current sales volume is 30,000 units. The firm can substantially improve the product quality by add¬ing a new piece of equipment at an additional fixed cost of $6,000. Variable costs would increase to $.60, but sales volume should jump to 50,000 units due to a higher-quality product. Should AudioCables buy the new equipment?
2. The Goodparts Company produces a component that is subsequently used in the aero-space industry. The component consists of three parts (A, B, and C) that are purchased from outside and cost 40, 35, and 15 cents per piece, respectively. Parts A and B are assembled first on assembly line I, which produces 140 components per how. Part C un-dergoes a drilling operation before being finally assembled with the output from assem¬bly line 1. There are in total six drilling machines, but at present only three of them are operational. Each drilling machine drills part C at a rate of 50 pare per hour. In the final arsembly, the output from assembly line I is assembled with the drilled part C. The final assembly line produces at a rate of 160 components per hour. At present, components are produced eight hours a day and five days a week. Management believes that if need arises, it can add a second shift of eight hours for the assembly lines.
The cost of assembly labor is 30 cents per part for each assembly line; the cost of drill¬ing labor is 15 cents per part. For drilling, the cost of electricity is one cent per part. The total overhead cost has been calculated as $1,200 per week. The depreciation cost for equipment has been calculated as $30 per week.
a. Draw a process flow diagram and determine the process capacity (number of compo¬nents produced per week) of the entire process.
b. Suppose a second shift of eight hours is run for assembly line I and the same is done for the final assembly line. In addition, four of the six drilling machines are made operational. The drilling machines, however, operate for just eight hours a day. What is the new process capacity (number of components produced per week)? Which of the three operations limits the capacity?
c. Management decides to run a second shift of eight hours for assembly line I plus a second shift of only four hours for the final assembly line. Five of the six drilling machines operate for eight hours a day. What is the new capacity? Which of the three operations limits the capacity?
d. Determine the cost per unit output for questions (b) and (c).
e. The product is sold at $4.00 per unit. Assume that the cost of a drilling machine (fixed cost) is $30,000 and the company produces 8,000 units per week. Assume that four drilling machines are used for production. If the company had an option to buy the same part at $3.00 per unit, what would be the break-even number of units?
3. The diagram below represents a process where two components are made at stations Al and A2 (one component is made at Al and the other at A2). These components are then assembled at station B and moved through the rest of the process, where some additional work is completed at stations C, D, and E.
Assume that one and only one person is allowed at each station. Assume that the times given below for each station represent the amount of work that needs to be done at that station by that person, with no processing time variation. Assume that inventory is not allowed to build in the system.
What is the average hourly output of the process when it is in normal operation?
4. Wally's Widget Warehouse takes orders from 7 ova, to 7 a.m. The manager wants to analyze the process and has provided the process flow diagram shown below. There are elute 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 Me order ready for shipping. Wally promises that every order placed today gets shipped tomorrow. That means that the picking and packing operations must finish all orders before they go home.
Wally wantsito 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 packi ng operations have to work dive 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 capuity (fnym 60 to 120 orders per hour), what impact does this have on your answers in pans (h), (c). and (d)?
5. The National State Bank is trying to make sure that it has enough toilers to handle the Friday afternoon rush of workers wanting to cash their paychecks. It is only concerned with the last hour of the day from 4:00 to 5:00 P.M. II takes 5 minutes per customer to be processed by the tellers. The average customer arrivals ere shown in the table below.
| TIME |
CUSTOMERS ARRIVING |
| 4:00-4:05 |
2 |
| 4:05-4:10 |
5 |
| 4:10-4:15 |
6 |
| 4:15-4:20 |
8 |
| 4:20-4:25 |
10 |
| 4:25-4:30 |
12 |
| 4:30-4:35 |
16 |
| 4:35-4:40 |
12 |
| 4:40-4:45 |
10 |
| 4:45-4:50 |
6 |
| 4:50-4:55 |
4 |
| 4:55-5:00 |
2 |
| 5:00-5:05 |
0 |
| Total |
93 |
The bank currently has 8 teller stations, and all are staffed during the Friday afternoon rush hour.
a. What is the current maximum output at the balk during rush hour?
b. Can the bank process all the customers by 5:00p.m.?
c. What is the maximum waiting time for customers, and what time period does it occur in?