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Analysis of Production Systems Ex 05

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9 views5 pages

Analysis of Production Systems Ex 05

Uploaded by

mohamedelnahasb26
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Mansoura University

Faculty of Engineering
Prod. Eng. & Mech. Design Dept.

Student Name ……………………………………………………


ID No. ……………………………………………………
Section No. ……………………………………………………
Serial No. ……………………………………………………
Group No. ……………………………………………………
Report No. ……………………………………………………
Submission date ……………………………………………………
Mansoura University 4th Year Prod. Engineering
Faculty of Engineering Analysis of Prod. Systems
Prod. Eng. Dept. 2024/2025 – 1st Term

Exercise No. 5 – Break-Even Analysis

Clarify your answer with illustrating sketches s whenever possible.

Q1) A company need a machine with the capacity of producing 200,000 units annually
of a particular product. Two machine suppliers have submitted bids. The X machine will
generate $80,000 fixed costs per year; but if the capacity of 200,000 units is reached,
profit will be $80,000 per year. The Y machine will have an annua fixed cost of
$51,000, and will yield a profit of $69,000 at 200,000 units. The product price is $2
per units. Determine:
a) The break-even point for each machine in units, $, and % capacity.
b) The sales volume at which the two machines achieve equal profit.
c) The range in sales 𝑄-unit and profit at which:
i. X machine is more profitable than Y.
ii. Y machine is more profitable than X.
d) Show your answers in a scaled break-even chart.

Q2) A company is considering establishing a warehouse in either the southern or eastern


part of the city where there is a potential market for their products. The management has
estimated the expenses that will be incurred if the warehouse is set up in either of the
locations; these expenses are listed in the table below.
Cost Factor South East
Annual land rent $800,000 $850,000
Number of laborers required 15 10
Payment of laborers $80 / day $96 / day
Assuming 360 working days per year, which is the best location?

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Q3) A firm is considering three production methods 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. Selling price is expected to be $50 per unit.
a) Calculate the break-even point (in units and in dollars) for each alternative. Which
alternative has the lowest break-even quantity?
b) Which alternative will produce the highest profits for an annual output of 10,000
units?
c) Assuming that 10,000 units is the full capacity output, tabulate the margin of
safety for the three alternatives.
d) Which alternative would require the lowest volume of output to generate an
annual profit of $50,000?
e) For what range of annual production volume values is each method preferred?

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Analysis of Production Systems First Term – 24/25

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