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Practice Problems: Supplement 7, Capacity Planning: Problem 1
Practice Problems: Supplement 7, Capacity Planning: Problem 1
Problem 1:
The design capacity for engine repair in our company is 80 trucks/day. The effective capacity is 40
engines/day and the actual output is 36 engines/day. Calculate the utilization and efficiency of the
operation. If the efficiency for next month is expected to be 82%, what is the expected output?
Problem 2:
Given: F fixed cost $1000
V variable cost $2 / unit
ANSWERS:
Problem 1:
Utilization =
Actual output
36
45%
Design capacity 80
Efficiency =
Actual output
36
90%
Effective capacity 40
F
1000 1000
$2, 000
V
2
0.5
11P
4
F
1000
500
P -V 4 2
Problem 3:
Problem 4:
Profit = TR TC
Option A: Stay as is:
Profit 50, 000*(1.25 .75) 12, 000 $13, 000.
Option B: Add equipment:
Profit 70, 000 *(1.25 1.00) 17, 000 $500.
Therefore the company should continue as is with the present equipment as this returns a higher
profit..
Problem 5:
Using current equipment:
BEP ($)
BEP ( x)
F
12, 000 12, 000 12, 000
$30, 000
V
0.75 1 0.60
0.40
1
1
P
1.25
F
12, 000
24, 000
P V 1.25 0.75
BEP( x)
F
17, 000 17, 000 17, 000
$85, 000.
V
1.00 1 .80
0.2
1
1
P
1.25
F
17,000
17,000
68,000.
P V 125
. 100
.
0.25
Problem 6:
Problem 7:
The net present value factor for 10% and 5 years is 3.79
( 3.79 0.909 0.826 0.751 0.683 0.621)
Therefore, the present value is: 3.79 * $6,000 $22,740
The Bad News is you do have to pay back the loans!