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    Forecasting

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    BETCY AWONG AWON -
    1. The utilization and efficiency of a production process is calculated. While high efficiency is good, utilization also depends on the design capacity. 2. To calculate the required design capacity given expected output, effective capacity, and actual output ratios. The design capacity needed to produce 8 units per week at a .5 effective capacity and .8 actual/effective ratio is 20 units. 3. Break-even analysis is conducted for a company with fixed costs of $9,200/month. The break-even quantity is 46,000 units and profits are calculated at various quantities and revenues. A graph shows total revenue exceeding total costs after 100,000 units of production.

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    Forecasting

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    BETCY AWONG AWON -
    19 views2 pages
    1. The utilization and efficiency of a production process is calculated. While high efficiency is good, utilization also depends on the design capacity. 2. To calculate the required design capacity given expected output, effective capacity, and actual output ratios. The design capacity needed to produce 8 units per week at a .5 effective capacity and .8 actual/effective ratio is 20 units. 3. Break-even analysis is conducted for a company with fixed costs of $9,200/month. The break-even quantity is 46,000 units and profits are calculated at various quantities and revenues. A graph shows total revenue exceeding total costs after 100,000 units of production.

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    1. The utilization and efficiency of a production process is calculated. While high efficiency is good, utilization also depends on the design capacity. 2. To calculate the required design capacity given expected output, effective capacity, and actual output ratios. The design capacity needed to produce 8 units per week at a .5 effective capacity and .8 actual/effective ratio is 20 units. 3. Break-even analysis is conducted for a company with fixed costs of $9,200/month. The break-even quantity is 46,000 units and profits are calculated at various quantities and revenues. A graph shows total revenue exceeding total costs after 100,000 units of production.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    19 views2 pages

    Forecasting

    Uploaded by

    BETCY AWONG AWON -
    1. The utilization and efficiency of a production process is calculated. While high efficiency is good, utilization also depends on the design capacity. 2. To calculate the required design capacity given expected output, effective capacity, and actual output ratios. The design capacity needed to produce 8 units per week at a .5 effective capacity and .8 actual/effective ratio is 20 units. 3. Break-even analysis is conducted for a company with fixed costs of $9,200/month. The break-even quantity is 46,000 units and profits are calculated at various quantities and revenues. A graph shows total revenue exceeding total costs after 100,000 units of production.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    CHAPTER 5 SOLUTIONS:

    Solutions

    Actual output 7
    1. a. Utilization = = x100% = 70.00% (2 marks)
    Design capacity 10
    Actual output 7
    Efficiency= = x100% = 87.50%
    Effective capacity 8
    Actual output 4
    b. Utilization = = x100% = 66.67% (2 marks)
    Design capacity 6
    Actual output 4
    Efficiency= = x100% = 80.00%
    Effective capacity 5
    c. This is not necessarily true. If the design capacity is relatively high, the utilization
    could be low even though the efficiency is high.
    (1 mark)

    2. Given:
    Effective capacity = .50 (Design Capacity)
    Actual output = .80 (Effective capacity)
    Actual output desired = 8 jobs per week

    By substitution:
    Actual output = (.80) x [(.50) (Design capacity)]
    Actual output = (.40) (Design capacity)
    Re-arranging terms:
    Actual output
    Design Capacity =
    .40
    By substitution (Actual output desired = 8 jobs from above):
    8
    Design capacity = = 20 jobs
    .40
    (4 marks)

    3. Given:
    FC = $9,200/month
    v= $ .70/unit
    R= $ .90/unit
    FC $9,200
    a. QBEP = = = 46,000 units (1 mark)
    R − v $.90 − $.70
    b. Profit = R x Q – (FC + v x Q)
    1. P61,000 = $.90(61,000) − [$9,200 + $.70(61,000)] = $3,000
    2. P87,000 = $.90(87,000) − [$9,200 + $.70(87,000)] = $8,200 (2 marks)
    Specified profit + FC $16,000 + 9,200
    c. Q= = = 126,000 units (1 mark)
    R −v $.90 / unit − $.70 / unit
    Total Revenue $23,000
    d. Total Revenue = R x Q, so Q = = = 25,555.56 units
    R $.90 / unit
    (1 mark)
    e. $100,000 TR = $90,000 @ Q = 100,000 units
    TC = $79,200 @ Q = 100,000 units TR

    Cost TC

    $50,000

    $9,200

    0
    100,000
    Volume
    (units)
    (2 marks)

    4. Given:
    FC R v
    : $40,000 $15/unit $10/unit
    B: $30,000 $15/unit $11/unit

    FC $40,000
    a. QBEP = Q BEP ,A = = 8,000 units
    R −v $15 / unit − $10 / unit
    $30,000
    QBEP, B = = 7,500 units (2 marks)
    $15 / unit − $11/ unit

    b. Profit = Q(R – v) – FC
    [A’s Profit] [B’s Profit]
    Q($15 – $10) – $40,000 = Q($15 – $11) – $30,000
    $5Q - $40,000 = $4Q - $30,000
    $5Q - $4Q = - $30,000 + $40,000
    Q = 10,000 units (2 marks)

    c. PA = 12,000($15 – $10) – $40,000 = $20,000 [A is higher]


    PB = 12,000($15 – $11) – $30,000 = $18,000 (1 mark)

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