Week 2 Homework Questions

1. Problem 5.11 (page 181 in the text)
   1. The product design group has determined that it needs to design a new series of switches. It must decide on one of three. The market forecast is for 200,00 units. The better and more sophisticated the design strategy and the more time spent on value engineering, the less will be the variable cost. The chief of engineering disen has decided that the following costs are a good estimate of the initial and variable costs connected with each three strategies.
      1. Low-Tech- low technology, low cost process consisting of hiring several new junior engineers. This option has a fixed cost of $45000 and variable cost probabilities of 3 for $55 each, .4 for $.50, and ,3 for $.45
      2. Subcontract: A medium cost approach using a good outside design staff. This approach would have a fixed cost of $65,000 and a variable cost probabilities of .7 of $.45, .2 of $.40 and .1 of $.35
      3. High Tech- high tech approach using the very best of the inside staff and the latest computer aided design technology. This approach has a fixed cost of $75,00 and variable cost probabilities of .9 of $.40 and .1 of $.35
   2. What is the best decision based on an expected monetary value criterion.
      2) A company is deciding if it should design an advertising system for use on Twitter. The first option is to skip out on designing, with no net costs or gains. The second option is System A, which would result in additional sales of either $50,000 under good conditions or $10,000 under bad conditions. The final choice is System B, which would increase sales by $20,000 under both good and bad conditions. Suppose that good conditions are twice as likely as bad conditions. Which option should the company pursue if developing a system costs $25,000?
2. Problem 17.1 (page 661 in the text)
   1. The beta 2 computers electronic processing unit contains 50 components in series. The average reliability of each component is 99.0% Using figure 17.2 determine the overall reliability of the processing unit
3. Problem 17.3 (page 661 in the text)
   1. What are the expected number of yearly breakdowns for the power generator at Orlando utilites that has exhibited the following data over the past 20 years.

5) The diagram below identifies the elements of service as provided by a soft drink vending machine. Each element has an estimate of its own reliability, independent of the others. What is the reliability of the "system"?

6) Which product design below has the higher system reliability?

7) Big John's Manufacturing currently produces its lead product on a machine that has a variable cost of $0.32 per unit, and fixed costs of $75,000. Big John is considering purchasing a new machine that will drop the variable cost to $.28 per unit, but has a fixed cost of $150,000. What is the cross-over point between the two machines?

8) The local convenience store makes personal pan pizzas. Currently, their process makes complete pizzas, fully cooked, for the customer. This process has a fixed cost of $20,000, and a variable cost of $1.75 per pizza. The owner is considering a different process that can make pizzas in two ways: completely cooked (as before), or partially cooked and then flash frozen, for the customer to finish at home. This alternate process has a fixed cost of $24,000, but a lower variable cost (because much less energy is used in baking) of $1.25 per pizza.

a. What is the crossover point between the existing process and the proposed process?

b. If the owner expects to sell 9,000 pizzas, should he get the new oven?

9) An executive conference center has the physical ability to handle 1,100 participants. However, conference management personnel believe that only 1,000 participants can be handled effectively for most events. The last event, although forecasted to have 1,000 participants, resulted in the attendance of only 950 participants. What are the utilization and efficiency of the conference facility?

11) Problem S7.25

a. Zan and angela started A&Z lettuce products. They will help vendors and they can adequately estimate demand, fixed costs, revenues and variable cost per 5-pound bag of lettuce. They think a largely manual process will have monthly fixed costs of $37,500 and variable costs of $1.75 per bag. A more mechanized process will have fixed costs of $75,000 per month with variable costs of $1.25 per 5-pound bag . They expect to sell the shredded lettuce for $2.50 per 5 pound bag

what is the break even quantity for manual process?

what is the revenue at the break even quantity for the manual process?

What is the break even quantity for the mechanized process

What is the revenue at the break even quantity for the mechanized process?

What is the monthly profit of loss of the manual process if they expect to sell 60,000 bags of lettuce per month?

At what quantity would zan and angela be indifferent to the process selected?

Over what range of demand would the manual process be preferred over the mechanized process? Over what range of demand would the mechanized process be preferred over the manual process

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Solution: The downloadable solution consists of 10 pages, 1186 words and 6 charts.
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