5. A manager has the option of purchasing one, two, or three machines.

Fixed costs and potential volumes are as follows:

Variable cost is $10 per unit, and revenue is $40 per unit.
a) Determine the break-even point for each range.

Break-even point = [Fixed cost / (Revenue Per Unit – Variable cost)]

Break-even point for Machine 1:

= [Fixed cost / (Revenue Per Unit – Variable cost)]

= [9600/(40-10)

= 9600 / 30

=320 units

** 320 is not in range of outputs hence BEP is not valid.

Break-even point for Machine 2:

= [Fixed cost / (Revenue Per Unit – Variable cost)]

= [15000/(40-10)

= 15000 / 30
 = 500 units

Break-even point for Machine 3:

= [Fixed cost / (Revenue Per Unit – Variable cost)]

= [20000/(40-10)]

= 20000 / 30

= 666.7 units

b) If projected annual demand is between 580 and 660 units, how many
machines should the manager purchase?

The break-even point is 500 units when comparing the projected range of demand to the two ranges where
a break-even point lies in between 301 and 600.

Thus, even if demand were to be at the low end of the range, it would still be higher than the break-even
point and generate a profit.

The manager should therefore pick two machines.

6. Print-for-All is a family-owned print shop that has grown from a three-

press two-colour operation to a full-service facility capable of performing a
range of jobs from simple copying to four-color printing, scanning, binding,
and more. The company is moving into a new facility and would like some
help arranging its 16 processes into an efficient, yet flexible, layout. A list
of the most popular jobs is shown with processing information. How would
you arrange the processes to ensure an efficient and flexible operation?

2
3
ORIGINAL MATRIX

    Process

  1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

A X X                   X        

B           X   X                

C X           X             X    

D X X         X             X    

E       X   X                    

F           X   X     X          

G X X                   X        

H         X         X         X  
Jobs

I X X X                     X    

J         X           X          

K                   X         X X

L       X   X         X   X      

M   X             X     X        

N                   X         X X

O         X         X         X X

P       X   X         X          

Q               X                

Upon sorting the original matrix with respect to Jobs

4
 Process
  1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

A X X                   X        

C X           X             X    

D X X         X             X    

G X X                   X        

I X X X                     X    

H         X         X         X  

B           X   X                
Jobs

E       X   X                    

F           X   X     X          

J           X         X          

L       X   X         X   X      

P       X   X         X          

K                   X         X X

N                   X         X X

O         X         X         X X

M   X             X     X        

Q               X                

Final Matrix (Upon sorting for process)

5
 Process
1 1 1 1 1 1 1
  1 2 3 7 9 5 4 6 8
2 4 0 5 6 1 3
A X X       X                    
C X     X     X                  
D X X   X     X                  
G X X       X                    
I X X X       X                  
M   X     X X                    
H               X X X            
Jobs

K                 X X X          
N                 X X X          
O               X X X X          
B                         X X    
E                       X X      
F                         X X X  
J                         X   X  
L                       X X   X X
P                       X X   X  
Q                           X    

Jobs Process
Group 1 A, C, D, G, I, M 1,2,3,7,9,12,14
Group 2 H, K, N, O 5,10,15,16
Group 3 B,E,F,J,L,P,Q 4,6,8,11,13