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# MGT 455 WEEK 5 CHAPTER 7 AND S7 PROBLEM SET (BENCHMARK ASSIGNMENT)

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7,5
Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increased next year. Borges has developed costs for three alternatives. They are general-purpose equipment (GPE), flexible manufacturing system (FMS), and expensive, but efficient, dedicated machine (DM). The cost data follow:

General PurposeEquipment(GPE)
FlexableManufacturingSystem(FMS)
DedicatedMachine(DM)

Annual contracted units
200 000
200 000
200 000

Annual fixed cost
\$100 000
\$200 000
\$500 000

Per unit variable cost
\$15,00
\$14,00
\$13,00

Which process is best for this contract?

7,7
Using the data in Problem 7.5, determine the best process for each of the following volumes: (1) 75,000, (2) 275,000, and (3) 375,000.

General PurposeEquipment(GPE)
FlexableManufacturing System(FMS)
DedicatedMachine(DM)

Annual contracted units
200 000
200 000
200 000

Annual fixed cost
\$100 000
\$200 000
\$500 000

Per unit variable cost
\$15,00
\$14,00
\$13,00

7,11
Tim Urban, owner/manager of Urban’s Motor Court in Key West, is considering outsourcing the daily room cleanup for his motel to Duffy’s Maid Service. Tim rents an average of 50 rooms for each of 365 nights (365 × 50 equals the total rooms rented for the year). Tim’s cost to clean a room is \$12.50. The Duffy’s Maid Service quote is \$18.50 per room plus a fixed cost of \$25,000 for sundry items such as uniforms with the motel’s name. Tim’s annual fixed cost for space, equipment, and supplies is \$61,000. Which is the preferred process for Tim, and why?

S7.3
If a plant has an effective capacity of 6,500 and an efficiency of 88%, what is the actual (planned) output?

S7.5
Material delays have routinely limited production of household sinks to 400 units per day. If the plant efficiency is 80%, what is the effective capacity?

S7.7
Southeastern Oklahoma State University’s business program has the facilities and faculty to handle an enrollment of 2,000 new students per semester. However, in an effort to limit class sizes to a “reasonable” level (under 200, generally), Southeastern’s dean, Holly Lutze, placed a ceiling on enrollment of 1,500 new students. Although there was ample demand for business courses last semester, conflicting schedules allowed only 1,450 new students to take business courses. What are the utilization and efficiency of this system?

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