A small service company is looking to offer three levels of service Express, Fast, and Regu- lar. The data are summarized in the table below. The company also has fixed annual costs of $100,000. Solution: See Spreadsheet. Service Level Express Fast Regular Price Variable Cost $30 $15 $20 $10 $10 $8 % of total Revenues 25 50 25 1. What is your break-even point in dollars for all service categories combined? 3 2. At breakeven what are the sales and quantity sold for the Express category? 3 3. Suppose that 2,500 customers send packages in the coming year. If each customer spends 4 (on average) $100. Would you breakeven? How much (positive or negative) profit will you incur at the end of the year?

exercicee 2

Two products, A and B, are produced by the same facility on the same set of workstations (X, Y, W ), as shown in the figure below. The times required for each step for each product are as shown. Also shown are: Demand for each product per week (90 units for A, 85 for B); Revenue from each product per unit ($55 for A, $65 for B). Product A requires $2 worth of raw material per unit; Product B, $5;

: using bottleneck analysis, find the optimal product mix (i.e., how much to produce of each product) and the corresponding net contribution. [ If it is possible to reduce the time required by product B on workstation X, what is the 5 smallest number of reduction minutes that would lead the product mix to change? What would be the new product mix?