Created by Dr.Muhtar Sapiri,SE.,MM.,M.Kes.,Ak.

,CPA 1

TUGAS

No.1 ( EOQ)
Geneva Company produces safety goggles for coal miner. Goggle are produced in batches according to
model and size. Although the setup and production time varies for each model, the smallest lead time
is 6 days. The most popular model, Model SG4, takes 2 days for setup and the production rate is 750
units per day. Th expected annual demand for the model is 36.000 units. Demand for the model,
however, can reach 45.000 units. The cost of carrying one SG4 unit is $3 per unit. The setup cost is
$6.000 . Geneva chooses its batch size based on the economic order quantity criterion. Expected
annual demand is used to computed the EOQ.
Recently, Geneva has encountered some stiff competition, especially from foreign sources. Some of the
foreign competitors have been able to produce and deliver the googles to retailers in half the time it
takes Geneva to produce. For example, a large retailer recently requested a delivery of 12.000 SG4
googles with the stipulation that they be delivered within 7 working days. Geneva had 3.000 units of
SG4 in stock. The informed the potential customer that they could deliver 3.000 units immediately and
the other 9.000 units in about 14 working days.. with the possibility of interim partial orders being
delivered. The costumer declined the offer indicating that the total order had to be delivered within 7
working days so that their stores could take advantage of same special local condition. The costumer
expressed regret and indicated that they would accept the order from another competitor who could
satisfy the time requirements.
REQUIRED:
1. Calculated the optimal batch size for model SG4 using the EOQ model. Was Geneva response
to the costumer right ? Would it take the time indicated to produces the number of units wanted
by the costumer ? Explain with supporting computation.
2. Upon learning of the lost order, the marketing manager grumbled about Geneva’s inventory
policy “ We lost the order because we didn’t have sufficient inventory. We need to carry more
units in inventory would have been needed to meet customer requirements? In the future, should
geneva carry more inventory? Can you think of other solutions?
3. Fenton gray, the head of industrial engineering, reacted differenty to the lost order “ Our
problem is more complex than insufficient inventory. I know that our foreign competitor carry
much less inventory than we do. What we need to do is decrease the lead time. I have been
studying this problem and my staff has found a way to reduce setup time for model SG4 from 2
days to 1,5 hours. Using the new procedure, setup cost can be reduced to about $94. Also, by
rearranging the plant layout for this product--- creating what are called manufacturing cells---
we can increase the production rate from 750 units per days to about 2.000 units per days.
Assume that the engineer’s estimated are on target. Compute the new optimal batch size (using
the EOQ formula). What is the new lead time ? Given this new information, would Geneva
have been able to meet the costumer time requirement? Assume that there are eight hours
available in each workday.
4. Suppose that the setup time and cost are reduced to 0,5 hours and $100, respectively. What is
the batch size now? As setup time approaches zero and the setup cost becomes negligible, what
does this imply? Assume for example that it takes 5 minutes to setup and cost about $0,864 per
setup.

No.2 (BREAK EVENT POINT)

Danna Lumus, the marketing manager for a division that produces variety of paper product, was
considering the divisional manager’s request for a sales forcast for a new line of paper napkins. The
divisional manager was gathering data so that he could choose between two different production
processes. The first process would have a variable cost of $10 per case produced and fixed cost of
$100.000. The second process would have a variable cost of $6 per case and fixed cost of $200.000,-.
The selling price would be $30 per case. Danna had just completed a marketing analysis that projected
annual sales of $30.000 cases.
Danna was reluctant to report the 30.000 forecast to the divisional manager. She knew that the first
process was labor intensive, whereas the second was largely automated with little labor and no
requirement for an aaditional production supervisor. If the first process were chosen, jerry Johnson, a
good friend, would be appointed as the line supervisor. If the second process were chosen, Jerry and an
entire line of laborers would be laid off. After some consederation, Danna revised the projected sales
downward to 22.000 cases.
Created by Dr.Muhtar Sapiri,SE.,MM.,M.Kes.,Ak.,CPA 2

She believed that the revision downward was justified. Since it would lead the divisional manager to
choose the manual system, it showed a sensitivity to the needs of current employees sensitivity that she
was afraid her divisional manager did not possess. He was too focused on quantitative factors in his
decision making and usually ignored the qualitative aspects.
REQUIRED :
1. Compute the break eventpoint for each process
2. Compute the sales volume for wich the two process are equally profitable. Indentify the range
of sale for wich the manual process is more profitable than automated process. Identify the
range of sale for wich the automated process is more profitable than manual process. Why did
the divisional manager want the sales forecast?
3. Discuss Danna’s decision to alter the sales forecast. Do you agree with it ? Disd she act
ethically? Was her decision justified since it helped a number of employees retain their
employment? Should the impact on employees be factored nto decision? In fact, is it unethical
not to consider the impact of decisions on employees?

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