Chapter 05 Capacity Planning Assignment 5 Problem 5-12 A manager must decide how

Question

Chapter 05 Capacity Planning Assignment 5 Problem 5-12 A manager must decide how many machines of a certain type to purchase. Each machine can process 100 customers per day. One machine will result in a fixed cost of $2.000 per day, while two machines will result in a fixed cost of $3,800 per day Variable costs will be $20 per customer, and revenue will be $45 per customer 3 a. Determine the break-even point for each range. One machine Two machines b. If estimated demand is 90 to 120 customers per day, how many machines should be purchased?

Explanation / Answer

A. Break Even Point = Fixed Cost / (Revenue - Variable Cost)

For One machine

BEP = 2000 / (45 – 20) = 80

For Two machines

BEP = 3800 / (45 – 20) = 139.29 = 152

B. A demand of 90 to 120 can be fulfilled by One Machine as it has BEP of 80 while the BEP of two machine is 152 which will cause loss of resource if purchesd.

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