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Financial Plan: Utilization & Efficiency Analysis

The document outlines a financial planning activity involving problem-solving scenarios related to utilization and efficiency calculations for loan processing and furnace repair operations. It includes a make-or-buy decision analysis showing that making an item is more cost-effective than buying it, and an equipment decision recommending Type B machines for lower costs. Additionally, it addresses a situation in a computer repair service, suggesting improvements to overcome inefficiencies and meet demand.

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Allan vincent Eyatid
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13 views2 pages

Financial Plan: Utilization & Efficiency Analysis

The document outlines a financial planning activity involving problem-solving scenarios related to utilization and efficiency calculations for loan processing and furnace repair operations. It includes a make-or-buy decision analysis showing that making an item is more cost-effective than buying it, and an equipment decision recommending Type B machines for lower costs. Additionally, it addresses a situation in a computer repair service, suggesting improvements to overcome inefficiencies and meet demand.

Uploaded by

Allan vincent Eyatid
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

STI College

Course: BM2106
Activity: 07 Task Performance 1
Topic: Creating a Successful Financial Plan

Problem Solving
1. Determine the utilization and efficiency for each of the following situations.

Formula:
Utilization = (Actual Output ÷ Design Capacity) × 100
Efficiency = (Actual Output ÷ Effective Capacity) × 100

a. Loan Processing Operation

Actual Output = 7 loans/day


Design Capacity = 10 loans/day
Effective Capacity = 8 loans/day

Utilization = (7 ÷ 10) × 100 = 70%


Efficiency = (7 ÷ 8) × 100 = 87.5%

Answer: Utilization = 70%, Efficiency = 87.5%

b. Furnace Repair Team

Actual Output = 4 furnaces/day


Design Capacity = 6 furnaces/day
Effective Capacity = 5 furnaces/day

Utilization = (4 ÷ 6) × 100 = 66.67%


Efficiency = (4 ÷ 5) × 100 = 80%

Answer: Utilization = 66.67%, Efficiency = 80%

2. Make-or-Buy Decision

Given:
Make: Fixed Cost = P7,500,000, Variable Cost/unit = P3,000, Volume = 12,000
Buy: Fixed Cost = None, Variable Cost/unit = P4,000, Volume = 12,000

Computation:
Make: 7,500,000 + (3,000 × 12,000) = 43,500,000
Buy: 4,000 × 12,000 = 48,000,000
Answer: The firm should make the item because the total cost (P43,500,000) is lower than
buying (P48,000,000).

3. Equipment Decision (Type A vs. Type B)

Analysis Table:
C1: 1,500 units, Type A = 1 hr, Type B = 2 hrs
C2: 1,000 units, Type A = 3 hrs, Type B = 2 hrs

Total Hours:
Type A = (1,500 × 1) + (1,000 × 3) = 4,500 hrs
Type B = (1,500 × 2) + (1,000 × 2) = 5,000 hrs

Each machine operates 8 hrs/day × 250 days = 2,000 hrs/year

Machines needed:
Type A = 4,500 ÷ 2,000 = 2.25 → 3 machines
Type B = 5,000 ÷ 2,000 = 2.5 → 3 machines

Total cost:
Type A = 3 × 750,000 = P2,250,000
Type B = 3 × 550,000 = P1,650,000

Answer: Choose Type B equipment, needing 3 units, to minimize purchase cost.

Essay Question
Situation:
A computer repair service has:
Design capacity = 80 repairs/day
Effective capacity = 64 repairs/day
Actual output = 62 repairs/day
Demand = 70 repairs/day

Answer:
The manager should investigate bottlenecks, worker efficiency, and scheduling issues that
limit output. Since the effective capacity is 64 but only 62 repairs are done daily, it indicates
minor inefficiencies like equipment downtime, insufficient staffing, or workflow delays.
Improving employee training, equipment maintenance, and time management could help
reach or exceed 70 repairs daily. These steps ensure better utilization of resources and
higher customer satisfaction.

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