Homework on Efficiency, Capacity and Breakeven Point Q1: For the past month, the plant has an effective capacity of 6,000. It has made only 4,500 hammers per day because of material delay, employee absences and other problems. What is its efficiency? Efficiency = actual output / standard output Efficiency = = Q2: A three station work cell has a product that must go through Station 1 with a capacity of 25 units per hour. Then the product proceeds to station 2 with a capacity of 10 units per hour. Last, to station 3 with a capacity of 15 units per hour. a) Which station is the bottleneck? b) What is the throughput time (cycle time) of the system? (hint, calculate how many minutes are spent at each station, throughput time is the total for one unit to go through each station) Station 1 Time Station 2 Time Station 3 Time mins per unit mins per unit mins per unit 0 Total mins per unit c) If the firm operates 10 hours per day, 5 days per week, what is the weekly capacity of this work cell? Total weekly unit capacity units Q3 Jenelle Heinke, the owner of Ha'Peppas Pizza is considering a new oven in which to bake the firm's signature disk, veggie pizza. Oven type A can handle 25 pizzas per hour. The fixed costs with oven A are $25,000 and the variable costs are $2.50 per pizza. Oven B is larger and can handle 40 pizzas an hour. The fixed cost associated with oven B is $30,000 and the variable costs are $1.50 per pizza. The pizzas sell for $15 each. a) What is the break-even point for each oven? A B FC= FC= R= R= b) What is the indifference point between these two ovens? Indifference point = (FC1-FC2)/(VC2-VC1) c) If the owner expects to sell 4,000 pizzas, which oven should she purchase? d) If the owner expects to sell 8,000 pizzas, which oven should she purchase? units VC= VC= BEP= pizzas BEP= pizzas Q2: A three station work cell has a product that must go through Station 1 with a capacity of 25 units per hour. Then the product proceeds to station 2 with a capacity of 10 units per hour. Last, to station 3 with a capacity of 15 units per hour. a) Which station is the bottleneck? b) What is the throughput time (cycle time) of the system? (hint, calculate how many minutes are spent at each station, throughput time is the total for one unit to go through each station) Station 1 Time Station 2 Time Station 3 Time mins per unit mins per unit mins per unit 0 Total mins per unit c) If the firm operates 10 hours per day, 5 days per week, what is the weekly capacity of this work cell? Total weekly unit capacity units Q3 Jenelle Heinke, the owner of Ha'Peppas Pizza is considering a new oven in which to bake the firm's signature disk, veggie pizza. Oven type A can handle 25 pizzas per hour. The fixed costs with oven A are $25,000 and the variable costs are $2.50 per pizza. Oven B is larger and can handle 40 pizzas an hour. The fixed cost associated with oven B is $30,000 and the variable costs are $1.50 per pizza. The pizzas sell for $15 each. a) What is the break-even point for each oven? A B FC= FC= R= R= b) What is the indifference point between these two ovens? Indifference point = (FC1-FC2)/(VC2-VC1) c) If the owner expects to sell 4,000 pizzas, which oven should she purchase? d) If the owner expects to sell 8,000 pizzas, which oven should she purchase? units e) At what volume should Janelle switch ovens if she starts with the lower capacity option? units VC= VC= BEP= pizzas BEP= pizzas