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A company manufactures a product using machine cells. Each cell has a design cap

ID: 397132 • Letter: A

Question

A company manufactures a product using machine cells. Each cell has a design capacity of 250 units per day and an effective capacity of 230 units per day. At present, actual output averages 200 units per cell, but the manager estimates that productivity improvements soon will increase output to 228 units per day. Annual demand is currently 80,000 units. It is forecasted that within two years, annual demand will triple. How many cells should the company plan to acquire to satisfy predicted demand under these conditions? Assume that no cells currently exist. Assume 241 workdays per year.

Explanation / Answer

Solution:

Current Annual demand = 80,000 units

Projected Annual demand = 240,000 units (Annual demand will triple)

Increased output = 228 units per day

Number of working days = 241 workdays per year

Annual capacity per cell = Increased output x Number of working days

Annual capacity per cell = 228 x 241 = 54,948 units

Number of cells required is calculated as,

Number of cells = Projected Annual demand / Annual capacity per cell

Number of cells = 240,000 / 54,948

Number of cells = 4.37 or 5 (Rounding off to the next whole number)

Number of cells = 5

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