Solutions

Actual output
Urilization =
Design capacty 1
Actual output 00%=87.50%
Effective
Eficiency= 3

b. Uilization=Actualoutput=x100%=66.67%
[Link] Design capacity
Actual outpu
Eficiency= Effective capacity =z100%=80.00%
5
C This is not necessarily true. If the design capacity is relatively high, the utilization could be
low even though the eficiency is high.

Given:
Effective capacity .50 (Design Capacity)
Actual output 80(Effective capacity)
Actual output desired = 8 jobs per week

By substitution:
Actual output = (80) x [(.50)Design capacity)]

Actual output=(40)Design capacity)

Re-aranging tems:
Actual output
Design Capacity= 40
By substitution (Actual output desired jobs from above):
=8

Design capacity= 40 20 jobs

5-5
3 Given:
FC $9,200/month

S .70/unit
S 90/unit
R
FC $9,20046,000 unils
. R-v S90-S.70

+vxQ)
b. Profit RxQ-(FC =
S3,000
Paio0S.90(61,000)-
[$9,200 +S.70(61.000)]
1. + S.70(87,000)) =$8,200
Pazoo0S.90(87,000)-[S9,200

2.
profit+FC
$16,000+. =126,000 units
-Pecyied $.90/unit-S.70/unit
c.
R-v
$23,000
Total Revenue 25,555.56 units
Revenue
=
R xQ, so Q= R S.0/unit
d. Total

e. $100,000- TR=$90,000@Q=100,000units
TC $79,200@Q=100,000 units R
**********************************************.
TC
Cost

S50,000

$9,200
U
100,000
Volume
(units)

4. Given: FC R
A: $40,000 $15hunit S10/unit
B: $30,000 $15/unit $1 1/unit

$40,000 8,000 units

aQaER- QBERA $15/unt -S10/unit
$30,000 7,500 units
SI5/unit-$11/unit

5-6
 FC
A:Profit- QR -v)-
[A's Profit) (B's Profit]
S15-$10)-S40,000= Q(S15-$11)-$30,000
S5Q-$40,000-$4Q $30,000
ssQ-$40-$30,000+ $40,000
Q- 10,000 units

Pa=12,000
$20,000 [A is higher)
a.
Pa 12,000(S15-S11)-$30,000=$18,000

Given
Q
Demand =30,000
FC $ 2 5 , 0 0 0

v=$.37/pen

a Given R =$1.00/pen
FC $25,000
23,0U0 =39,682.54 units
nsR- $1.00-$.37
b. Given:Demand= 30,000 units. Specified profit= $15,000

Specified profit+FC - $15,000+$25,000

R-v R-$.37
$40,000
0 R-$.31
By substitution:
30,00040,000

R-$.37
30,000x(R-$.37) S40,000
30,000R-$11,100 $40,000
30,000R =$40,000+$11,100
30,000R= $51,100
R S51,100/30,000
R $1.71 frounded up)

5-7
 $82
. Cost for Plart A:$20+S.45(120)+ S.20(40)=
- 592
$20+5.5S(120)+ S.15(40)
Cost for Plan'B:
$i00
Cost for Plan C: $20 +S80+S.40(0)
=

Pl B

$140

S120
PhC
Si00

$80

$60

s40
$20

200 300
Minutes of daytime calls (evening minutes ignored)

5-8
 daytime cost functions:
dering only
phan
A = 5 2 0+ S 4 5 D

+S.S5D
$20
B
200 minutes) =$20+$80= $100
Plan

C(up
han
minutes)
=
S20 0+S.40 (D-200)
Phn
C (over 200
Colecting t e m s :

C(over
200minutes) $100+S.40D-$50 $50+$0.40D
Plan

le cansee that Plan A dominates Plan B over all volumes; therefore, we

NoE PlanB from
our analysis.

anomit
omparingPlan Ato Plan C ver the range I-200minutes:
Determine the indifference point between Plan A & Plan C
$20+S.45D=$100

S.45D $80

D-$80/S.45

D=177.78 minutes

to less than 177.78daytime minutes.

Plan A is optimal for 0
than 177.78 minutes upto 200 minutes.
Plan Cis optimal for more

Comparing Plan Ato Plan Covertherange> 200 minutesfor more than 200 minutes.
Looking at the graph, we can see that Plan C preferred
is

minutes.
Conclusion: Plan A is preferred from 0 to less than 177.78daytime
for more than177.78daytime minutes.
Plan C is preferred
miutes:
We are indifferent between the two plans at 177.78 daytime

d Given:
S.45D+$.20E
Plan A Cost for Daytime & Evening Minutes: $20+
$20+S.55D+S.1SE
Plan BCostfor Daytime& Evening Minutes:

Seting these equal and solving for D:

$20+$.45D+$.20E $20 +$.55D+S.1SE
S45D+$.20E=S.55D+$.15E
S.45D -$.55D= S.15E-$.20E
S.10D -S.0SE
D S-05E/-S.10
D SE minutes.
is. example, if E 100 minutes, then D S0
=

15 half as much as E For

50)) ofthe total minutes be indifferent
s IS the same as stating that D 1/3 ((50/(100+
made in the daytime, she
would
minutes
Son: At 33.33% of total call
between Plan A &Plan B.

5-9
Given: TC
Source FC
Process A $160,000 $5 160,000+5Q
Process B 190,000 4 190,000+4Q
Vendor
70
three total cost functions as
We can begin by graphing the
the Vendor costs less until its
shown below. We can see
of Process B.
function intersects with that
Find the indifference point between the
Vendor &Process B:

20-190,000+40
Q-40 190,000
30 190,000
Q-190,000/3
Q 63,333.33 units
Beyond this point, we can see that Process B will be preferred
due to its lower cost.
The Vendor is preferred between 1 to less than 63,333.33 units.
Process B is preferred for more than 63,333.33 units.

Cost ($DO0)

S00
A

400

300

200

100 Wendor

10

Qx1000) 080
20 30 40 S0 50
70. 80

5-10
 FC
Souce
$200,000 S17
t a m a l1

240,000
14
lnenal
2
20 up to 30,000 units
VendorA
22 for 1 to 1,000; 18 each iflarger amount
VendorB
21 for 1 to 1,000; 19 each for additional units
VendorC

units TCfor 20,000 units

TC for10,000 200,000 1"(20,000)-Ss40,000
1: 200,000+17(10,000) =
$370,000
Int.
S380,000 = 240,00014(20,000)-S520,000
Int.2:240,000+ 14(10,000)
Vend A:
20(10,000)- $200,000 20(20,000) =S400,000
Vend B: 8(10,000)=$180,000 18(20,000)=$360,000
19(9,000)-S192.000 21,000 +19(19,000)-S382,000
Vend C: 21,00
lowest
At 10,000 units, total
cost is lowest when using Vendor [Link] 20,000 units, total cost is
when using Vendor B.

b. Given:
Cost functions for each alternative:
Intemal 1: $200,000+$17Q
Intermal 2: $240,000+$14Q
Vendor A: $20Q(Q 30,000)
S18Q for all units when Q>1,000
Vendor B: $220 (Q 1,000)
Vendor C $21Q(Q1,000) $21Q+S19Q-1,000) when Q>1,000

Eirst,we anabyzetherangeofl-1.000units:
Vendor A exhibits lower total cost over this range than do Vendar B and Vandor C; therefote,
We can eliminate Vendors B &C from consideration for this range.

the range ofl-

Next, we could graph the costs functions ofthe remaining three options for
1,000 units:
Intemal 1: $200,000+ S17Q
Intemal 2: $240,000+ $14Q
Vendor A: $20Q

Shown in the Excel chart below, Vendor A provides the lowest total cost over this entire
ge. If the manager is going to purchase between I to 1,000 units, Vendor A is prefcred

5-11
 300,000

250,000

200,000
Int. 2
int.1
S 150,000

100,000

S0,000
Vend A

1000
Units

Second, we analyze the range of I.001 units or more

L.000 units to determine the total costs ifwe na
Total Cost Functions
(when
Internal 1:5200,000+S17Q purchasingl,001 units or
more):
Intemal 2:S240,000+S140
Vendor A: S200 ( 30,000
Vendor B:S18Q units)
Vendor C: $210+S190-1,000)

Looking at the cost functions

C. Therefore, we above, we can see
can eliminate Vendor A and that Vendor B dominates Vendor A and Vendar
VendorC from further
We must compare the total costs
than 1,000 units. of Intemal 1, Internal 2, and
consideration.
We can
plot these costs Vendor B when purchasing m
functions on a graph as
shown in the Excel chart
below:

5-12
1402000

L200000

,00,00

800,000

6 0 , 0 0 0
Int 2

400,000 Vend B
200,000

0 10000 20000 30000 Units 40000 S0000 60000 70000

Wocan see in the chartabove that Vendor B has the lowest total cost until its total cost function
intersects the total cost function oflnternal 2.

Our next step is to determine the indifference point between Vendor B and Intermal 2.

Set the two cost functions equal and solve for Q:

$18Q $240,000+S14Q
$180-$140=$240,000
S40 $240,000
Q$240,000/$40
Q-60,000 units
Therefore, Vendor B has lower total cost in the range of 1,001 units-59,999 units.
Internal 2 has lower total cost > 60,000 units.

Summary:
Purchase Quantity:
1-1,000 units Prefer Vendor A
1,001-59,999units Prefer Vendor B
60,000 units Indifferent between Vendor B & Internal 2
60,000 units Prefer Intermal 2
Note; Intemal I and Vendor C are never best.

5-13
 day per
cell. 240 working davs
ys/year
Given:Actual output
will be 225 per Projecte
9.
150,000 within 2 ycers. annual dem
days/year = 54.000
demank
units/day x 240
cell -225
Annual capeacity per
Celk:0- 2.78,roundhupto3 cells
Cells 40
to select one type of machine to purchase w

10. Given: Our objetive

is
iven the data
Purchasing bellowr.m
Machine Type Cost/Machine
$10,000
S14,000

Process Time per

Annual
Demand Unit on Type 1
[Link] per
Unit on Type 2
Product (units) (min.) min.)
12,000 4
0O1
002 0,000
003 18,000
a. Number of machines of each type needed if the machines will operate 60 minutes
per hour &
hours per day, 250 days per year.
Using Machine Type l:
Each Machine Type l is available 250 x 8 x 60= 120,000 minutes per year

Processing Requirements using Machine Type 1:

Procduct 001: 12,000 x 4 min.
48,000 min. =

Product 002: 10,000 x 9 min.90,000 min. =

Product 003: 18,000 x 5 min. =

90,000 min.
Total 228,000 min.
Number of Machine Type 1 Needed= processing time needed/ processing time capaciy pet
228,000/ 120,000 1.9=2 machines
(round up)
Capacity 2x 120,000 minutes= 240,000
Capacity cushion 240,000-228,000 minutes
=

12,000 minutes
Using Machine Type 2:
Each Machine Type 2 is available 250 x 8x
60-= 120,000 minutes per year
Processing
Produca 001:Requirements
12,000 x 6 using Machine Type 2:
min.
72,000 min.
Product 002: 10,000 x 9 min.
=

Product 003: 18,000 x 3 90,000 min.

Total 216,000 min. min. 54,000 min. =

Number of
216,000 Machine Type 2
120,000 =1.8 2Needed= processing
Emetime needed/
needed' processing time capa
Capacity 2x 120,000 machines (round up) p
=

minutes =240,000 minutes

Capacity cushion=240,000
216,000 24,000 minutes

5-14
 Saced high uncertainty of annual demand, we would select the type of machine with the
h Wanacity cushion (Machine Type 2). If we faced low uncertainty of annual demand, we
dsclect the type of machine with the lower capacity cushion (Machine Type 1).

=
S6/hour for Type1 & 85/hour for Type 2
i Given:Operating costs
v e n .

Purchas Cost for chine Type I =2 machincs x $10,000/machinc- $20,000

Time for Machine Type I = 228,000 minutes =3,800 hours
TotalOperating
x S6/hour $22,800
Total Operating Cost 3,800 hours
= =

S20,000 +S22,800= $42,800

Total Cost
Purchase Cost for Machine Type 2 =2 machines x $14,000/machine =$28,000

TaalOperating Time for Machine Type 2216,000 minutes =3,600 hours

Total Operating Cost=3,600hours x $S/hour =$18,000
Total Cost S28,000+$18,000 S46,000
Conclusion: Machine Type I would minimize total cost.

Given: 10 hrs. or 600 min, operating time perday per machine.

of
HA

250 days x 600 min. 150,000 min. per year operating time per machine.
=

Machine purchase costs: A =$40,000; B $30,000; C=$80,000.

Total processing time by machine

Product A B C
48,000 64,000 32,000
48,000 48,000 36,000
30,000 36,000 24,000
4 60,000 60,000 30,000
Total 186,000 208,000 122,000

N, 186,000 machines24 =2
150,000
N 208,000 1.38 2 machines
I50,000
N.22,00-81«1
150,000
machine
Options
Buy two A machines at a total
purchase cost of 2 x S40,000 $80,000. =

Buy 2 B machines at a total purchase cost of 2x $30,000= S60,000.

Buy 1 C machine at a total
purchase cost of $80,000.
Conclusion: We should buy 2 of the B machines at a total cost of $60,000.

5-15
 B =$1 1/hour/machine: C=
Costs: A =S10hour/machine;
b. Given:Operating
$12/hourmachine.

machine:
Total cost for cach typeof 3,I00.00 hrs. x S10 $31,000+ S80.00.
min./hour =
=

186,000 min/ 60 1,000

A 2): 208,000 min/60 min/our = 3,466.67 hrs. x $11 = $38,133 +S60,000=So
B2: S98,133

2,033.33 hrs. x Si12 =

S24,400+$80,000=
min/hour
104,400
=

c): 122,000 min/60

Conclasion:Buy 2
Bs-these have the lowest total cost

customer, vS20 customer,

per machine process 100 ustomer
each can Custo pet day,
fixed cost-$45
12. Given:R permachine=
for one $2,000 per day total; and fixed cost for two machines $3,800

total.
FC
a
FC Range
OpEPR-v
One machine $2,000 1 to 100 2000/ (45-20) 80
Two machines 3,800 101 to 200 3800/ (4520)= 152

b. Given: Estimated demand= 90 to 120 customers per day

Because BEP for one machine is 80 and 80< 90, and because BEP for two machines is 152 and
I52> 120, we should purchase one machine, because èven at the upper limit of demand (120
customers), we have not reached the break-even point associated with two machines.
Conclusion: Purchase one machine.
 95/car, v $3/car, Fixed Cost for one line= S6,000/month, Fixed Cost for
=

R two lines
t G
SIQ,50
nanth, each line can process IS cars/hour, & the car wash is open 300 hours/month.
break-even for each option:
Determine the
Todothis, we will need to convert fixed costs per month to fixed costs per hour
hour 36,000/300-S20
=

One line fixed cost per

hour-$10,500/300 $35
Tvo line fixed cost per

OneLins $20
=6.78 cars
OaxR-v s5.95-$3.0

Two Lines:

FC $35
aER-v $5.95-$3.00 =11.86 cars
Ifdemand averages between 14 and 18 cars an hour, either option would break even.
need to detemmine the net profit per hour for each Therefore, we
possible demand value as shown below.
Volume No. of Lines Used Net Profit per
Hour
14 $21.30 14 (5.95 -3)-20
15 24.25 15 (5.95 -3)-20
16 24.25 15 (5.95 -3)-20
17 24.25 15 (5.95-3)-20
18
24.25 15 (5.95-3)-20
Volume No. of Lines Used Net Profit per Hour
4 2 $6.30 14 (5.95-3)-35
15
9.25 15 (5.95-3)-35
16 12.20 16 (5.95 -3)-335
17 2 15.15 17 (5.95-3)-35
18
18.10 18 (5.95-3)-35

Conclusion:Choose one line. Net profit per hour always is higher

one line for the given demand range of 14 to using
l18 cars per hour.

F-9 5-17
 elfective capacity for cach onera
following
with the eration4 14/hr.
have a 4-stcp
process 3 = 11/hr, Opera
Given: We 15/hr, Opcration
Operation 2
=

14. 1= 12/hr.
Opcration with the lowest effeehi.
is
determined by the operation pacity
of the process
a. The capacity
11/hr.
Operation 3
=

15%.
b. Given: Operation 1 by
the capacityof 10%.
Operation 2 by
Increase
Option I:
the capacity of 10%.
Operation 3 by
Increase
Option 2:
Increase the capacity of
Option 3:

Option [Link] Capacity 12x 1.15 = 13.8/hr.

New Capacity=
Opcration 1 3 11/hr, Operation 4 =14hr =

Operation 2 15/hr, Operation

=

Operation 1
=
13.8/hr, with thel lowest effective capacit
determined by the operation
process is
The capacity ofthe =
0/hr.
Operation 3
=
11/hr. Increase in capacity

Option 2Process Capacity 15x 1.10

=
16.5/hr.
Operation 2 New Capacity = 16.5/hr, Operation 3 11hr, Operation 4 =14/hr =

2
Operation 1 12/hr, Operationdetermined operation with the lowest effective capacitv
=

is by the
The capacity ofthe process
Increase in capacity
=
O/hr.
Operation 3 11/hr.

Ontion 3 Process Capacity

11 x 1.10=12.1/hr.
Operation 3 New Capacity
=

Operation 1 12/hr, Operation 2 15/hr, the

= Operation 3 12.1/hr, Operation 4 14/hr.
The capacity of the process is
determined by operation with the lowest effective capacity
1/hr (12/hr- 11/hr).
Operation 1 =12/hr. Increaseincàpacity
=

of Operation 3 by 10% yields the

Conclusion: Select Option 3. Increasing the capacity
greatest increase in process capacity (1/hr).
7.
15. Given: Two parallel lines feed their combined output to Operation 3 =16/hr.
Upper Line Capacities: Operation 1 18/hr, Operation 2 15/hr, Operation
=

Lower Line Capacities: Operati on 4 17/hr, Operation 5 15/hr, Operation 6=17/hr.

Capacity ofOperation 7, 20/hr. Capaciny of Operation 8= 24/hr.
a. Capacity of the systen:

Capacity of Upper Line = 15/hr.

Capacity of Lower Line = 15/hr,
Combined Capacity = 30/hr.

The two lines feed 30/hr to Operation 7. Operation 7 has capacity of20/hr and Operat
has capacity of 24/hr. Operation 7 has the lowest capacity-it can handle only 20/n.

Conclusion: Capacity of the system = 20/hr.

5-18
 The capacity of one operation couldbeincreased,
GiyenCity is limited by Operation 7, therefore, increase the capacity [Link] 7by
proce
4 units/hor
from 20 units/hour to 24 units/hour at which time Operation 8aiso becomes a
b o t t l e n e c k .

arallel lines feed their combined output to Operation 10.

Threeparal
ine Capacities: Operation 1 = 22/hr, Operation 2 = 17ht, Operation 3= 18/hr
UpperLin
Line Capacities: Operation 4 20/hr, Operation 5= 1&hr, Operation 6 1 8 .
Line Capacities: peration 7 22/hr, Operation 8 17/hr, Operation 9=15/hr.
LOwE Operation =5l/hr. Capacity l1 $4/Mr.
of Operation =

Capacit of
Line =
17/hr.
Capacityof Upper Line 18/hr. =

Capacity ofMiddle 15/hr.

Line =

CapacityofLower 50/hr. =

Cambined Capacity
The three lines feed 50/hr to Operation 10. Operation 10 has capacity of SIhr and Operation 11
sCapacity of 54/hr. The lowest capacity is the combined capacity ofthe three lines =50/r.

Conclusion: Capacity of the system 50/hr.

=

Given:Two parallel lines feed their combined output to Operation 7.

Upper Line Capacities: Operation 1 = 15/hr, Operation 2 =10/hr, Operation3=20/hr.
LowerLine Capacities: Operation 4- S/hr, Operation 5= 8/hr, Operation 6=12hr.
Capacity of Operation 7 34/hr. Capacity of Operation 8=30/hr.

a. Capacity of Upper Line = 10/hr.

Capacity of Lower Line = S/hr.
Combined Capacity = 15/hr.

The two lines feed 15/hr to Operation 7. Operation 7 has capacity of34/hr and Operation8
has capacity of 30/hr. The combined capacity of the two lines is lowest at 15/hr.

Conclusion: Capacity of the system = 15/hr.

b. Increasing Capacity of One Operation:

Process capacity is limited by the combined capacity ofthe two lines (15/hr).
The Upper Line Capacity = 10/hr and is detemined by Operation 2. If the capacity of
Operation 2 were increased by S/hr to 15hr (the same as Operation 1), thenthe Upper [Link]
Capacity would increase by 5/hr, the Combined Capacity would increase by Shr, and process
capacity would increase by 5/hr to 20/hr.
ne Lower Line Capacity= 5/hr and is detemined by Operation [Link] capacity of
peration 4 were increased by 3/hr to 8/hr (the same as Operation 5), then the Lower Line
apacity would increase by 3/hr, the Combined Capacity yould increase by 3/hr, and process
capacity would increase by 3/hr to 18/hr.

COnclusion: Increase the capacity of Operation 2 by S/hr. The resulting process capacity
Would be 20/hr.

5-19
 S12,000.
inidial costS12,000. Annual savings= S1,500,
Annual savines
Given:New
equipment
I8.
18.
Initial cost $12,000 8,00 years
PaybackAnnualsavtngs $1,500/yr.

initial cost=S18,0 anual savings =$2,400.

Given:New equipment
19 $18,000
Initial cost

$2,400/yr.
7.50 years
Peybark ualsavtngs
cost of remodeling
=

s3,000
$25,000. Anmual savings =$3.00:in
Year 1,
20 Given Inmitinl
2.& S5,00thereafter.
S40M
S7,000. That leaves us with $1R0
in 2years= $3,000+ S4,000
=

Sevings coup at
per year.

$18,000 = 3.60 additional years

Payback 35.000/y7.
cost=2+3.6 5.6 years.
Concdusion:Total timetorecoup initial

Case: Outsourcing ofHospitalServices

work performed within the hospital are that t
The advantages ofhaving the ousourced
with the hospital, still felt a sense ofownership int
hospital's workers felt a connection
the food service work. Perhaps in a larger hogi
and did not need to be trained to perform not be an [Link]
connection between workers and the hospital might
a larger stafi, this
there might be large cost savingsinvolved.

outside fim manage the service, themotia

or

2 There could be a cost savings in having an

housekeeping.
outsourcing could be avoidance the burden managing
of of
and ower
it would be economies of scale oN
3 Ine reason for asking another hospital to join
laundry service.

5-20
ehment Module: Solving Capacity Planning Problems
ichmentModu
pblems can be classified in a mumber of different ways. One such classification for
iy-planningproble
below:
ediate and short-range problems given
is
Output capacity determination

Input capacity determination

Capacity-demand match (input or output)

solutions to the
dsteeories listed above can involve either manufacturing or service problems. The solve
and intuitive way comprehend and
to capacity-
Jnwing realistic examples will provide easy
an an

paning problems.

Poblem 1Manufacturing Example

determination and
(Ooutput capacity capacity-demand match)
two eight-hour shifts per day and 6 days pér week. The
Aatery manufacturing plant normally operates
the aggregate demand for the
anufacturer can produce 375 units per hour. Over the next four weeks,
kateries is given in the following table.

2 3 4
Week
Demand 30,000 32,000 38,000 40,000

Calculate the weekly capacity of the plant.

. I fthe fim attempts to produce the demanded quantity, at what percentage of the capacity would
it be operating each week?
C. Determine the "Level" production schedule and the resulting average inyentory for the 4-week
period. Assume that no shortages are allowed and the current inventory is zero and desired ending
inventory in week 4 also is zero.
Determine the "Chase" production schedule and the resulting average inventory for the 4-week
period. Assume that no shortages are allowed and the current and desired ending inventory in
week 4 is zero.
. Based on your answers to part c and d, discuss the trade-off between "Level" and the "Chase"
production plans.
Note: Part a of this problem can be classified as output capacity determination while partsb
through e deal with capacity-demand match.

5-71
Problem 2Serice Example
(Output capacity determination)
lines and one expresschece
siore has a total
of four regular checkout cout line. Recen
A small grocery either excessive idle time for cashiers or
f
on Sundays the
store has been experiencing
The results ofa recent time study
med
perfome by a management
consu
essively long
customer waiting lines.
time for express and regular checkout lines areting
company showed
that the average
thbe
service
next step in analyzing the problem
the manager of the grocer and 10
As
determine the estimated capacity of the store on Sundays in terms total number of custor store
minutes respecávely. wanis
to midnight on Sundays. The express
checkout line is alwav Uen
the store is open from 6 a.m. while
from 6 a.m. to 9 a.m. and also only one regular line oner
there is only one regular line open
checkout lines open from 9 a.m. to noon and also from 6 Pm|
to midnight. There are twO regular n. to

All four regular lines are open between

noon and 6 p.m. 9p
Determine the caurrent capacity of the store i totalnumber ofcustomers for Sundays.
Assume thet the store manager decides to reduce the number of regular lines from 2 to 1 bethe
d.
7p.m. and 9 pm. and closes the express line between 6 a.m. and 8 a.m. and 10 p.m. and
midnight. What is the revised capacity for Sundays?

Problem 3 Manufacturíng Example

(lnput capacity determination - number of resources needed)

Avideo equipment manufacturer produces videotapes and DVDs. The manufacturing facility operats
two eight-hour shifts per day for 6 days a week. The unit manufacturing time is ó minutes for each
videotape and 8 minutes for each DVD
a. Given that machine operators work at 80% eficiency, determine the number of workers needei
to produce 5000 videolapes and 2500 DVDs per week.
. Given that machines have 95% efficiency, determine the number of machines needed to prodir"
500 videotapes and 2500 DVDs per week.
Assune that the mumber of workers is sufficient, what is the maximum number of videolapea
the maximum mumber of DVDs can be
that manufachured with 15 machines.
d. Assuine that the mumber of machines is sufficient, what is the maximum number of videoape
and the maximum number of DVDs that can be manufachured with 20 workers.

5-22
 Hlem 4 Manufacturing Etample with Multiple Products and Multiple Machines
Problen

CaDacity detemination - number ofresources needed)

(lnput
ng many other products, a tirm manufactures three different electronic components (A, B, C) on any
itre different machines (1.2, 3). The quarterly forecasted demand for the thre components is givenin
ofthree
Table 1.
Table1
Quarterly Forecasted Demand by Product Type
Season
Component Winter Spring Summer Fall

A 8,000 20,000 12,000 6,400

B 4,000 12,000 8,000 5,600

C 9,600 19,200 14,400 7,200

machine.
Table 2 displays the unit production time for each product on each

Table 2
Unit Production Time (in hours)
Component
B C
Machine
50 40
.25
.30 .15
2 10
45 20 35
3

A takes 15 minutes (,25 x 60 min.) to process

2, we can state that éach unit of product to
Interpreting Table one unit of product B on machine 3.
while it takes 12 minutes (.20 x 60 minutes) process
on machine 1, machine
machine hours demanded for each quarter
a. Determine the maximum number of
combination.
time available for each
determined that the amount of productive
b. The production manager has machine type needed
Determine the maximum number of each
machine per quarter is 600 hours.
to be dedicated to produce
all components in each quarter.
variation in demand? Explain.
Does there appear to be seasonal

5-23
 Solution to Problem 1 Manufacturing Example
determination and capacity-demand
match)
(Outputcapacity (8 hrs/shift) (2 shifts/day) (6 days/wes
a. The number ofunits/week-(375 units/hr.)
batteries
The number ofunitsweek -36,000

b.

Week
Forecasted
30,000 32,000 38,000 40,000
demand
36,000 36,000 36,000
Capacity 36,000
% of capacity 83.33% 88.89% 105.56% 111.11%
utilized

In determining the "Level" production plan, if the demand is less than or equal to the prodtvction
capacity, we simply determine the average demand for the four-week period and use the avern
demand as our production quantity. However, if the average demand is above capacity, then we
can try either to expand capacity, to delay the order, or to reduce the quantity. Because in this
instance the average demand is less than capacity in each week, we can use the average demand
as our production quantity.
,000+32,000 +38,000+
40.000
Average demand 4
=35,000
The "Level" production plan and the resulting ending inventory for each week are given in the
following table.

Week 0 3
Forecasted demand 30,000 32,000 38,000 40,000
Capacity 36,000 36,000 36,000 36,000
Production 35,000 35,000 35,000 35,000
Ending Inventory 0 5,000 8,000 5,000

Average inventory= 18,000/4 4,500 units.

d. In determining the "Chase" production plan, we attempt to match production with demand unl
there
is insufricient capacity. The amount of shortage from the latest period with insuthde
capacity
4 has a
is
scheduled for production in the latest period with excess supply. In our proble
potential shortage of 4,000 units and week 2 is the latest pecriod with excess
4,000 units. Therefore, week 4's shortage is scheduled capacy
for production in week 2. Likewise,
3 has a potential
shortage of 2,000 units, which is scheduled for
production in weck

5-24
 heChase
"p
production planaand the resulting ending inventory for each week are given in the
owingtable,

2 3
Week

e c a s t e dd e m a n d
30,000 32,000 38,000 40,000
36,00 36,000 36,000 36,000
C a p a c i t y

32,000 36,000 36,000 36,000

Production

2,000 6,000 4,000

E n d i n gl nv e n t o r y

inventory=
12,000/4 =
3,000units.
while the "Level" production
ction plan results in fewer units in inventory,
Average
"Chase" producti
more uniform
u
production, thus less hiring andlayoffcosts.
results in
plan

Service Example
Problem 2
n to
at
Capacity d e t e m i n a t i o n )

(60 minutes) (3 minutes per cust.) 20

customers =

express line
=

Hourly capacityofthe 6 customers

line (60 minutes)/(10'minutes per cust.)
=
=

Hourly capacity of the regular

x (18 hours) =360 customers
line for Sundays (20 customers)
=

Capacity ofthe express

line:
Capacity of the regular 18 customers
(6 customers/hr) 3 hours) (1 line)=
From 6 a.m. to 9
=
a.m.
customers
(2 lines) =36
From 9 a.m. to noon (6 customers/hr) (3 hours)
=

144 customers
(6 customers/hr) (6 hours) (4 lines)=
Fromnoon to 6.p.m.
=

hours) (2 lines) 36
customers =

customers/hr) (3
From 6 p.m. to 9 p.m. (6
=

ustomers
(6 customers/hr) (3 hours) (1 line)-18
midnight=
[Link] 18+36+144 +36+18-252 =
caustomers
line capacity
Sundaytotal regular line capacity Express
+ line capacity
erall Sunday capacity Total regular =

customers
360+252 612 =

herefore overall capacity for Sundays

customers/ hour)=80customers
line capacity (4 hours) (20 =
customers
Keduchionin express
hours) (6customers per
bour)12
in regular line capacity (2
CUOn 612-(80+12)= $20
customers

ewsedSunday capacity

5-25
 Erample

Manufacturing
needed)

3 of
r e s o u r c e s

usingthe
folowing notation,
Problem

resources
umber

Solation
to -

determinetion
forr
eqvation
capecity the
(inpot express

in
general, wecan

NE required
or workers)
where (machines

Number ofresounes
produced
time periodi
mumber
ofproducts resource per
scheduled

avnileble per
7Total time i
production
time forproduct tinme period
p=Unit scheduled
i for the
D-Demand forproduct measured as a peroentage
ofthe resource
F efRciency
Therefore,ifwe know the number of workers and want to determine the maviimum demand tha

we can manipulate the formula given above and obtain the

satisfied for agiven product, followi
equathon.:

D XTXE)

P
Given the above information, we can now solve Problem 3.

T=(2shiýts6 days)(8 hrs./ shift(60 min. / hr.)= 5,760 min./ week

P (6min. YS,00) +(8

TKE) min.X2.300)= 10.85 =11 workers
(6,760 X.80)

b. PP (6min.)(5,000))
(TXE) +(8min.}\2,0)=9.14» 10
(S,760)(95) machines

Ddeotape XTXE)_056,
Pvideolape 160),95) =13.680 videotapes
Do NXTXE)
PDVDKE)_05Y5.760)%(95)= 10,260 DVDs
D NXTYE)20Y5,160)%(80) _10,260 DVDs
d.
Putdeotope 6 =15,360 videotapes
DmTKE.20X5,160)(30)=11,520I1.520 DVDs
PovD =
DVDs

S.2
 roblem 4 Manufacturing Example with Multiple Products and MultipleMachines
Solation number of resources needed)
capacityd e t e r m i n a t

we need to convert the demand to machine hours for each machine in each season.
First

demand inthe
th winter is 100, 50, and 120 for components A, B and C respectively and it takes
The ours, and .4 hours
.5 hour to process components A, B and Crespetivelyon machine1.
25 hours, demanded for
fore With this infomation, we can compute the maximum machine hours
Ther
1 (M1) in the inter quarter.
machine
in Winter =

(25 8000)H.5X4,000)+(4Y9600)
=
7,840 hrs.
Mov hrs. for Ml

machine hours demanded can be calculated for the rest of the machine
Clnilary the quarterly
season combinations:

=18,680 hrs.
in Spring= (25{20,000(5(12,000)+(4)19,200)
Max. hrs. for Ml =
12,760 hrs.
=(,25)(12,000)+(.5)%8,000+(4)(14,400)
for Mi in Summer
Max. hrs. (25)%6,400}+(5X5,600){.4K7,200) 7,280
hrs. =

Ml in Fall
=

Max. hrs. for

(10X8,000)+(.30X4,000)+(15K9,600) =3,440hrs.
M2 in Winter
=

Max. hrs. for Spring=(10(20,000)+(30)X12,000)+(.15)X19,200) =8,480 hrs.

M2 in
Max. hrs. for (.10012,000)+(30X8,000){.15X14,400)
=
5,760 hrs.
=

[Link]. for M2 Summer in 3,400 hrs.

Fall=(10X6,400)+(30(5,600)+(15X7,200)

Max. hrs. for

M2 in

(45)%8,000)+(.2Y4,000)H(35X9,600)=-7,760
hrs.
M3 in Winter= hrs.
Max. hrs. for Spring=(45)(20,000)+(2X12,000)M35X19,200)=18,120

Max. hrs. for M3 in ( 4 5 ) ( 1 2 , 0 0 0 ) + ( 2 X 8 , 0 0 0 ) H 3 5 X 1 4 , 4 0 0 ) =

12,040 hrs
=
in Summer 6,520 hrs
Max. hrs. for M3
=
( 4 5 N 6 , 4 0 0 } + ( . 2 ) X S , 6 0 0 ) - ( 3 5 X 7 , 2 0 0 )

in Fall =

Max. hrs. for M3

5-27
 hours per quarter,
Because (7) () 600 productive

7,840 [Link] 13.07 14 machlne ls

Nomd 600 hrs.
we need to allocate 14 machine ls to produce
Thercfore we can conclude that at most
components A, B and C in the winter quarter.

3s needed in the spring quarter to make all three

hree
number ofmachine
Similarly the maximum
determined as follows:
components can be

18,120 [Link] 30.20-31 machine 3s

NwSpm 600 hrs

the maxinum number of each machine type needed by quartes

rter.
The following table sumnarizes
machine types needed
Quarterly Maximum number of
'Season_
Machine Winter Spring Summer Fall
32 22 13
14
2 6 15 10 6
13 31 21 11

All values in the table are rounded up.

Yes, there appears to be asignificantseasonal variation in demand. It appears that the highest
demand is experienced in the spring followed by summer. Therefore, most
are used in summer products and because of lead
likely the components
times, the demand peaks in the spring.

5-28