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Exam 5: A: Strategic Capacity Planning

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Question 21

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An alternative will have fixed costs of $10,000 per month,variable costs of $50 per unit,and revenue of $70 per unit.The break-even point volume is:

A) 143
B) 200
C) 350
D) 500
E) none of these.

F) B) and C)
G) A) and D)

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Question 22

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How many rose bushes would she have to produce and sell in order to make a profit of $6,000?

A) 6,000
B) 4,000
C) 3,000
D) 2,400
E) 1,500

F) B) and D)
G) D) and E)

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Question 23

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Given the following information,the efficiency is: Effective capacity = 50 units per day Design capacity = 100 units per day Actual output = 30 units per day

Stating capacity in dollar amounts generally results in a consistent measure of capacity.

What would be his profit if he were to perform 5,000 blood analyses?

-What is the anticipated utilization?

Seasonal variations are typically easier to deal with in capacity planning than random variations because seasonal variations tend to be:

What would be his annual profit if he were to process 4,000 recruits per year at this new location?

An investment proposal will have annual fixed costs of $60,000,variable costs of $35 per unit of output,and revenue of $55 per unit of output. (i)Determine the break-even quantity. (ii)What volume of output will be necessary for an annual profit of $60,000?

How many recruits would he have to process annually to make a profit of $100,000 at this new location?

Capacity decisions are always long-term decisions.

A small business owner is contemplating the addition of another product line.Capacity increases and equipment will result in an increase in annual fixed costs of $50,000.Variable costs will be $25 per unit. (i)What unit selling price must the owner obtain to break-even on a volume of 2,500 units a year? (ii)Because of market conditions,the owner feels a revenue of $47 is preferred to the value determined in part a.What volume of output will be required to achieve a profit of $16,000 using this revenue?

As forecasts are usually only accurate for the short term,forecasts are not useful in long-term capacity decisions.

Among the assumptions of break-even analysis is that the variable cost per unit remains the same regardless of quantity of output.

Design capacity refers to the maximum output rate possible given a product mix,operating hours,and machine maintenance.

Which of the following is not a determinant of effective capacity?

The ratio of actual output to effective capacity is:

A firm is considering three capacity alternatives: A,B,and C.Alternative A would have an annual fixed cost of $100,000 and variable costs of $22 per unit.Alternative B would have annual fixed costs of $120,000 and variable costs of $20 per unit.Alternative C would have fixed costs of $80,000 and variable costs of $30 per unit.Revenue is expected to be $50 per unit. (i)Which alternative has the lowest break-even quantity? (ii)Which alternative will produce the highest profits for an annual output of 10,000 units?

For fixed costs of $1,000,revenue per unit of $1,and variable cost per unit of $0.80,the break-even quantity is:

How many rose bushes would she have to produce and sell in order to break even?