Operations and Supply Chain Management (Mcgraw-hill Education)
Operations and Supply Chain Management (Mcgraw-hill Education)
15th Edition
ISBN: 9781259666100
Author: F. Robert Jacobs, Richard B Chase
Publisher: McGraw-Hill Education
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Question
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Chapter 7, Problem 15OQ

a)

Summary Introduction

To draw: A process flow diagram and determine the processing capacity of the whole process.

Process capacity:

Process capacity is the maximum level of output can be possibly obtained through a specific machine of the production line.

a)

Expert Solution
Check Mark

Explanation of Solution

Given information:

Hours     = 8 per day

Days     = 5 per week.

Cost of purchasing parts:

Part A     = 40 cents per piece.

Part B     = 35 cents per piece

Part C     = 15 cents per piece.

Production output:

Assembly line 1         = 140 components per hour.

Operational drill machines     = 3

Drilling Part C         = 50 parts per hour.

Final assembly line         = 160 components per hour.

Cost of production:

Assembly labor             = 30 cents per part.

Drilling labor                 = 15 cents per part.

Cost of electricity             = 1 cent per part.

Total overhead cost             = $1,200 per week,

Depreciation cost for equipment     = $30 per week

Process flow diagram:

Operations and Supply Chain Management (Mcgraw-hill Education), Chapter 7, Problem 15OQ , additional homework tip  1

Calculation of capacity:

Assembly line 1=Units per hour×Hours per day×Days per week=140×8×5=5,600 units per week

Drill machines=Number of drill machines×Parts per hour×Hours per day×Days per week=3×50×8×5=6,000 units per week

Final Assembly line=Units per hour×Hours per day×Days per week=160×8×5=6,400 units per week

The overall capacity of the process will be equal to the activity with the lowest individual capacity.

Hence, the capacity of the process is 5,600 units per week.

b)

Summary Introduction

To calculate: The new process capacity and identify the operation that limits the capacity.

b)

Expert Solution
Check Mark

Explanation of Solution

Given information:

Hours             = 16 per day

Days             = 5 per week.

Number of shifts     = 2 per day

Cost of purchasing parts:

Part A     = 40 cents per piece.

Part B     = 35 cents per piece

Part C     = 15 cents per piece.

Production output:

Assembly line 1         = 140 components per hour.

Operational drill machines     = 4

Drilling hours             = 8 per day

Drilling Part C         = 50 parts per hour.

Final assembly line         = 160 components per hour.

Cost of production:

Assembly labor             = 30 cents per part.

Drilling labor                 = 15 cents per part.

Cost of electricity             = 1 cent per part.

Total overhead cost             = $1,200 per week,

Depreciation cost for equipment     = $30 per week

Calculation of capacity:

Assembly line 1=Units per hour×Hours per day×Days per week=140×16×5=11,200 units per week

Drill machines=Number of drill machines×Parts per hour×Hours per day×Days per week=4×50×8×5=8,000 units per week

Final Assembly line=Units per hour×Hours per day×Days per week=160×16×5=12,800 units per week

The overall capacity of the process will be equal to the activity with the lowest individual capacity. The capacity of the process is 8,000 units per week.

The drilling operation only works for 8 hours in a day limiting the overall capacity.

c)

Summary Introduction

To calculate: The new process capacity and identify the operation that limits the capacity.

c)

Expert Solution
Check Mark

Explanation of Solution

Given information:

Hours for assembly line 1    = 16 per day

Hours of Final assembly line     = 12 per day

Days                 = 5 per week.

Number of shifts         = 2 per day

Cost of purchasing parts:

Part A     = 40 cents per piece.

Part B     = 35 cents per piece

Part C     = 15 cents per piece.

Production output:

Assembly line 1         = 140 components per hour.

Operational drill machines     = 5

Drilling hours             = 8 per day

Drilling Part C         = 50 parts per hour.

Final assembly line         = 160 components per hour.

Cost of production:

Assembly labor             = 30 cents per part.

Drilling labor                 = 15 cents per part.

Cost of electricity             = 1 cent per part.

Total overhead cost             = $1,200 per week,

Depreciation cost for equipment     = $30 per week

Calculation of capacity:

Assembly line 1=Units per hour×Hours per day×Days per week=140×16×5=11,200 units per week

Drill machines=Number of drill machines×Parts per hour×Hours per day×Days per week=5×50×8×5=10,000 units per week

Final Assembly line=Units per hour×Hours per day×Days per week=160×12×5=9,600 units per week

The overall capacity of the process will be equal to the activity with the lowest individual capacity. The capacity of the process is 9,600 units per week.

The final assembly line only works for 4 hours in the second shift limiting the overall capacity.

d)

Summary Introduction

To calculate: The cost per unit for the previous two calculated capacities.

d)

Expert Solution
Check Mark

Explanation of Solution

Given information:

Hours for assembly line 1    = 16 per day

Hours of Final assembly line     = 12 per day

Days                 = 5 per week.

Number of shifts         = 2 per day

Cost of purchasing parts:

Part A     = 40 cents per piece.

Part B     = 35 cents per piece

Part C     = 15 cents per piece.

Production output:

Assembly line 1         = 140 components per hour.

Operational drill machines     = 5

Drilling hours             = 8 per day

Drilling Part C         = 50 parts per hour.

Final assembly line         = 160 components per hour.

Cost of production:

Assembly labor             = 30 cents per part.

Drilling labor                 = 15 cents per part.

Cost of electricity             = 1 cent per part.

Total overhead cost             = $1,200 per week,

Depreciation cost for equipment     = $30 per week

Calculation of cost per unit when the capacity is 8,000 and 9,600 units:

Operations and Supply Chain Management (Mcgraw-hill Education), Chapter 7, Problem 15OQ , additional homework tip  2

Formula:

Operations and Supply Chain Management (Mcgraw-hill Education), Chapter 7, Problem 15OQ , additional homework tip  3

e)

Summary Introduction

To calculate: The break-even number of units.

e)

Expert Solution
Check Mark

Explanation of Solution

Given information:

Product selling price             = $4 per unit.

Fixed cost per drilling machine     = $30,000

Output per week             = 8,000 parts

Number of drilling machines         = 4

Product buying price             = $3 per unit

Calculation of break-even number of units:

Let ‘x’ be the number of units each option will produce.

The cost of buying the unit becomes

Total cost=3x .

When the firm decides to manufacture the part, it incurs a fixed for each of the drilling machines which will be:

Fixed cost for drilling machine=4 machines×30,000 per machine=$120,000

The cost per unit for manufacturing as calculated before is $1.81.

Therefore the total cost of manufacturing the part is:

Total cost=120,000+3x

The total cost of buying and manufacturing is equated to each other to calculate the break-even units as shown below:

3x=120,000+1.81x3x-1.81x=120,000x=120,0001.19=100,840 units

The break-even units are 100,840 units.

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