OPERATIONS AND SUPPLY CHAIN MANAGEMENT

CHAPTER 6 (Edisi 13)

KELAS G

Nurul Rahmita Fauziyah

041311233006

Departemen Manajemen
Fakultas Ekonomi dan Bisnis
Universitas Airlangga
2014
1. Owen Conner works part-time packaging software for a local distribution company in
Indiana. The annual fixed cost is $10,000 for this process, direct labor is $3.50 per package,
and material is $4.50 per package. The selling price will be $12.50 per package.

How much revenue do we need to take in before breaking even? What is the break-even
point in units?

Break even (units) $10,000/$4.50 = 2,223 units

Break even revenue 2,223*12.50 = $27,797.50

2. Audio Cables, Inc. is currently manufacturing an adapter that has a variable cost of $0.50
and a selling price of $1.00 per unit. Fixed costs are $14000. Current sales volume is 30,000.
The form can substantially improve the product quality by adding a new piece of equipment
at an additional cost of $6000. Variable costs would increase to $0.60, but sales volume
should jump to 50,000 units due to a higher-quality product. Should AudioCables buy the
new equipment?

BEP (units) = ($14.000+$6.000)/($1.00-$0.60)= 50.000 units

So, the company should adding one more machine. Altough FC and VC increase, the
company wouldnt lose cause BEP units equal with expectation sales that hopes the product
quality increase.

3. Consider the construction of a simple 8" X 10" wood picture frame. The picture frame
consists of four wood pieces that are cut from the wood molding, four staples to hold the
frame together, a piece of glass, a backing board made of cardboard, six points to hold the
glass and backing board to the frame, and a clip for hanging the picture frame to the wall.

a. Construct an assembly chart for the picture frame.

 b. Construct a flowchart for the entire process from receiving material to final inspection.

4. The purpose of this system design exercise is to gain experience in setting up a

manufacturing process. (We suggest that this be done as a team project.) Assignment:

(1)Get one Ping-Pong paddle.

(2)Specify the type of equipment and raw materials you would need to manufacture that
paddle, from the receipt of seasoned wood to packaging for shipment.
(3)Assume that one unit of each type of equipment is available to you. Further assume that
you have a stock of seasoned wood and other materials needed to produce and box 100
paddles.
Making reasonable assumptions about times and distances where necessary,
(1) Develop an assembly drawing for the paddle.
(2) Prepare an assembly chart for the paddle.
(3) Develop a process flowchart for the paddle.
(4) Develop a route sheet for the paddle.

5. The Goodparts Company produces a component that is subsequently used in the aerospace
indus- try. The component consists of three parts (A, B, and C) that are purchased from
outside and cost 40, 35, and 15 cents per piece, respectively. Parts A and B are assembled
first on assembly line 1, which produces 140 components per hour. Part C undergoes a
drilling operation before being finally assembled with the output from assembly line 1.
There are in total six drilling machines, but at present only three of them are operational.
Each drilling machine drills part C at a rate of 50 parts per hour. In the final assembly, the
output from assembly line 1 is assembled with the drilled part C. The final assembly line
produces at a rate of 160 components per hour. At present, components are produced eight
hours a day and five days a week. Management believes that if need arises, it can add a
 second shift of eight hours for the assembly lines. The cost of assembly labor is 30 cents per
part for each assembly line; the cost of drilling labor is 15 cents per part. For drilling, the
cost of electricity is 1 cent per part. The total over- head cost has been calculated as $1,200
per week. The depreciation cost for equipment has been calculated as $30 per week.

a. Draw a process flow diagram and determine the process capacity (number of
components produced per week) of the entire process.

A B C

140 components per hour

Capacity = 140 x 8 x 5
= 560 components
Assembled line 50 components
Drilling Pants
Drilling 1
Machine capacity
= 3 x 50 x 8 x 5
= 6000
components

Final

160 Components per hour capacity

FG = 160 x 8 x 5
= 6400 components

b. Suppose a second shift of eight hours is run for assembly line 1 and the same is done for
the final assembly line. In addition, four of the six drilling machines are made
operational. The drilling machines, however, operate for just eight hours a day. What is
the new process capacity (number of components produced per week)? Which of the
three operations limits the capacity?
Addition = 8 hours assembly line 1
8 hours on final assembly
4 drilling machines are made operational
Solution:
Line 1-140 x (8+8) x 5- 11200 units
Drilling Pants = (3+1) x 50 x 8 x 5= 8000 units
Final assembly = 160 x (8+8) x 5= 12800 units
So, line 1 and final assembly are teo of three operations that limited the capacity
c. Management decides to run a second shift of eight hours for assembly line 1 plus a
second shift of only four hours for the final assembly line. Five of the six drilling
machines operate for eight hours a day. What is the new caecity? Which of the three
operations limits the capacity?
Addition = 8 hours on assembly line 1
8 hours on final assembly
5 drilling machines are made operational
Solution :
Line 1 = 140 X (8+8) X 5 = 11200 units
Drilling Pants = (4+1) X 50 X 8 X 5 = 10000 Units
Final Assembly = 160 X (8+4) X 5 = 9600 Units

So, line 1 and drilling are two of three operations that limits the capacity.

d. Determine the cost per unit output for questions b and c.

Cost (b) = (11200 X 30) + (8000 X 16) + (12800 X 30)
= 336000 + 128000 + 384000
= 848000
848000
=105 cents/unit=$ 1.06
Cost per unit (b) = 8000

Cost (b) = (11200 X 30) + (10000 X 16) + (9600 X 30)

= 336000 + 160000 + 288000
= 848000
784000
=81.6 cents/unit=$ 0.816
Cost per unit (b) = 9600

e. The product is sold at $4.00 per unit. Assume that the cost of a drilling machine (fixed
cost) is $30,000 and the company produces 8,000 units per week. Assume that four
drilling machines are used for production. If the company had an option to buy the same
part at $3.00 per unit, what would be the break-even number of units?
FC
BEP (units) = PVC

30000
8000 = 4VC

32000 8000 VC =30000

2000 =8000VC
VC =0.25

If the price is $3
FC $ 30.000
BEP (units) = PVC = $ 3$ 0.25 =10.909 units
6. A book publisher has fixed costs of $300,000 and variable costs per book of $8.00. The
book sells for$23.00 per copy.

a. How many books must be sold to break even?

BE demand = total FC/unit price VC/unit

= $300,000/23-8=20,000

So, 20,000 books must be sold to reach break even.

b. If the fixed cost increased, would the new break-even point higher or lower?

From the formula given above, FC increased, the BEP will be higher

c. If the variable cost decreased, would the new break-even point higher or lower?

From the formula given above, VC decreased, the BEP will be lower

7. A manufacturing process has a fixed cost of $150,000 per month. Each unit of product
being produced contains $25 worth of material and takes $45 of labor. How many units are
needed to break even?

Break Even Point in Units = Fixed Costs / Unit Contribution Margin

Unit Contribution Margin (UCM) = Sales Price - Variable Costs

UCM = $90 - ($25 + $45) = $90 - $70 = $20

Breakeven Point = $150,000/$20= 7,500 units

8. Assume a fixed cost of $900, a variable cost of $4.50, and a selling price of $5.50.

a.What is the break-even point?

The profit function is y = (5.5 - 4.5)x - 900 = x - 900.

The break-even point is indeed x = 900. (Obvious)

b.How many units must be sold to make profit of $500.00?

To make a $500 profit, use the equation.

500 = x - 900 <=> x = 1400.

y/x = a <=> (x - 900)/x = a.

 (x - 900)/x = a <=> x - 900 = ax <=> x - ax = 900 <=> x(1 - a) = 900 <=> x = 900/(1 - a)

c.How many units must be sold to average $0.25 profit per unit? $0.50 profit per unit? $1.50
profit per unit?

a = 0.25, 0.5, 1.5

x = 900/(1 - 0.25) = 1200

x = 900/(1 - 0.5) = 1800

x = 900/(1 - 1.5) = -1800 (this means that we can't average a profit of of $1.5 per unit).

9. Aldo Redondo drives his own car on company business. His employer reimburses him for
such travel at the rate of 36 cents per mile. Aldo estimates that his fixed costs per year such
as taxes,Fixed Cost = $2052,Contribution = 36% -14.4% = 21.6%

Break even = fixed Cost / Contribution

= 2052 / 21.65

= 9500 miles

10. A firm sells two products, chairs and bar stools, for $50 per unit. The variable costs are $25
for each chair and $20 for each bar stool. Fixed costs for the firm are $20,000 per month. If
the sales mix is 1:1 (one chair sold for every bar stool sold), what is the breakeven point in
dollars of sales and in units of chairs and bar stools?

BEP=FC/CM
BEP=20,000/((50x2)-(20+25))
BEP=20,000/55
BEP=364(rounded) of chairs & 364 of Stools

In $, just times 364 x 100. If your lecturer likes details, then it's 363.6364.

BEP = FC/ CM

BEP = 20,000/ (((50+(50x4)-((25+(20x4)))

BEP = 20,000/145

BEP = 137.931 (or 138) or 137.931 chairs + 551.7241 stools.

 11. How would you characterize the most important difference for the following issues when
comparing a facility organized with workcenters versus a continuous process?

Issue Job Shop Flow Shop

Number of changeovers Many Few
Labor content of product High Low
Flexibility High Low
12. The diagram below represents a process where two components are made at stations A1 and
A2 (one component is made at A1 and the other at A2). These components are then
assembled at station B and moved through the rest of the process, where some additional
work is completed at stations C, D, and E.

Assume that one and only one person is allowed at each station. Assume that the timesE= given
0.55 min
below for each station represent the amount of work that needs to be done at that station by
= 60/0.55
that person, with no processing time variation. Assume that inventory is not allowed to=build
109 units
in the system.
What is the average hourly output of the process when it is in normal operation?
Notes: 1 person per machine and no inventory in the system
A = 0.3+0.4 B=0.75 min C= 0.65 D= 0.60 D= 0.60
0.7min = 60/0.75 min min min
60/0.7
85.7 units
= 80 units = 60/0.65 = 60/0.60 = 60/0.60
= 92 units = 100units = 100units

Dari proses diatas, dapat diketahui bahwa produksi terkecil adalah sebanyak 80 unit. Oleh
karena itu, kita dapat menyimpulkan bahwa setiap mesin dapat memproses sebanyak 80
unit. Jadi, rata-rata output per jam adalah 80 unit. E= 0.55 min
= 60/0.55
13. A certain custom engraving shop has traditionally had orders for between 1 and 50=units
109 units
whatever a customer orders. A large company has contacted this shop about engraving E= 0.55 min
reward plaques (which are essentially identical to each other). It wants the shop to place a
= 60/0.55
bid for this order. What will the shop likely have to do?
= 109 units
Solution:
This shop should make a production process.to make the production process, the shop
should do five basic structures:
a. Project layout: fixed location to produce the product.
b. Workcenter: sometimes reffered as a job shop, is where similar equipment or function
are grouped together.
c. Manufacturing cell: is a dedicated area where product that are similar in processing
requierements are produce.
d. Assembly line: is where work process are arranged according to the progerssive steps by
which the product is made.
e. Continues process: is similar with assembly line in thatproduction follows a
predetermined sequence of steps

14. The productprocess matrix is a convenient way of characterizing the relationship between
product volumes (one-of-a-kind to continuous) and the processing system employed by a
 firm at a particular location. In the table presented below, describe the nature of the
intersection between the type of shop (column) and process dimension (row).

WORKSTATION ASSEMBLY LINE

Engineering emphasis
General workforce skill
Statistical process control
Facility layout
WIP Inventory level

15. How would you characterize the most important difference for the following issues when
comparing a facility organized with workcenters versus a continuous process?
a. Throughput time (time to convert raw material into product)
b. Capital/labor intensity
c. Bottlenecks
Solution:
a. Throughput time (time to convert raw material into product) : Average amount of time
product takes to move through system. Throughput time decreases as you move from a job
shop to flow shop environment.

b. Capital/labor intensity :Can be defined as the ratio of labor cost to plant anmd equipment.
Capital intensity increases as you move to a flow shop (need for more machinery). Labor
intensity (assuming you mean of workers) would probably increases as well (dependson the
level automation). Ratio would increase in a flow shop because capital requirements are so
much greater.

c. Bottlenecks : is a phenomenon where the performance or capacity of an entire system is

limited by a single or limited number of components or resources. Bottlenecks means the
resource that requires the long operations of the supplay chain for certain demand, and
bottleneck would probably decrease in a flow shop.