ps assignment 6 & 7
TRANSCRIPT
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8/3/2019 PS Assignment 6 & 7
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Breakeven
Analysis
PS Homework 6 and 7
Due: Feb. 13, 2003
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In-class TEAM
Assignments The machinist who was hired at $20.00
per hour makes parts which are normallydistributed in size with a standard
deviation of .001 inches.s If your part requires an RC8 tolerance on
a diameter 1 hole and requires one hourto manufacture, what is the effective costof a part?
s Draw a break-even graph for this case.s Use the basic data shown on the next
slide.
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Basic Data
s Startup Costs are $125,000s Shipping is $10.00 per parts Materials $5.00 per part, fully
recoverable for a bad parts Sales price is $60.00 per parts
Inventory on hand required to be250 units
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Solution
s Find the actual limits on the size ofthe hole. For an RC8 diameter1.0 hole the limits are 1.0000 to1.0035.
s Assume a theoretical size in themiddle of that range, thus a size of1.00175 would be the expectedaverage size.
s Calculate the rejection fractionusing the standard deviation given.
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Solution (cont.)
s Find the z value associated with thelimits on the hole.x
Z+ = (1.0035-1.00175)/0.001 = 1.75x Z- = (1.0000-1.00175)/0.001 = -1.75s From the z table find the percentage
rejection for a z of 1.75
xAcceptable fraction is 2*(0.4599) =0.9198
x Rejection is therefore 0.0802
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Solution (cont.)
s Find the number which must bemanufactured to yield 1 sellable valuesx X * 0.9198 = 1X=1.0872
s Total cost is therefore:
(assuming material from rejected parts iscompletely recyclable)
x Shipping+Materials+Labor=
x $10.00*1.000 + $5.00*1.000 +$20.00*1.0872= $36.74 (per valve)
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Solution (cont.)
s Cost = 36.74*NAP + 125,000s Income = 60*NAP - 15,000
s Break-even:x Cost = Income
x NAP = 6,019 (number of acceptable parts
PRODUCED)x NAS = 6019 250 = 5,769 (number of
acceptable parts that must be SOLD)
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SolutionSolve in terms of
NASs Cost = 36.74*NAS + 125,000 + 250(36.74)s Income = 60*NASs
Break-even:x Cost = Income
x NAS = 5,769 (number of acceptable partsSOLD)
x NAP = 5,769 + 250 = 6,019 (number ofacceptable parts that must be PRODUCED)
s SAME AS BEFORE!!!!
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Further
Refinementss Inventory are never shipped so
that the cost of shipping for these
items should not be included in theanalysis.s On the previous slide, the effective
cost of the inventory parts is
$36.74 - $10.00 = $26.74.s See refined solution on next slide.
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Refined Solution
s Cost = 36.74*NAS + 125,000 + 250(26.74)s Income = 60*NASs
Break-even:x Cost = Income
x NAS = 5,662 (number of acceptable partsSOLD)
x NAP = 5,662 + 250 = 5,912 (number ofacceptable parts that must be PRODUCED)
Could also work in terms of NAP (next slide).
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Refined Solution
s Cost = 36.74*NAP + 125,000 - 250(10.00)s Income = 60*NAP 15,000s
Break-even:x Cost = Income
x NAP = 5,912 (number of acceptable partsPRODUCED)
x NAS = 5,912 - 250 = 5,662 (number ofacceptable parts that must be SOLD)
SAME AS BEFORE!!!
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Updated Graph
Breakeven Graph for Valve Production
$0.00
$50,000.00
$100,000.00
$150,000.00
$200,000.00
$250,000.00
$300,000.00
$350,000.00
$400,000.00
$450,000.00
0 1000 2000 3000 4000 5000 6000 7000 8000Number of Acceptable Valves PRODUCED, NAP
Worth($)
Cost
Income
750 27501750-250 77506750575047503750
Number of Acceptable Valves SOLD, NAS
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Assignment #6Due:02/13/2003
Team Assignments Evaluate the following situations and write
a memo to your supervisor (Ms. Jamison)with your recommendations and reasons.
s Clearly state which options you wouldrecommend the company to use and why.
s Include the effective cost of all six options.s Work problem in terms of parts SOLD.
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Assignment #6
(cont.)s Rather than hiring a machinist, you could
hire a Master Machinist at $30.00 perhour (i.e. Widget) her standard deviation
is only .0005 inchess You could hire an apprentice for only
$12.50 an hour with a standard deviationof .003 inches
s By spending an additional $50,000 youcan purchase better equipment which willreduce all standard deviations by 25%.
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Assignment #6(cont.)
Worker Std. Dev.without new
equip.
Std. Dev. withnew equip.
Apprentice .003 .00225
Machinist .001 .00075
MasterMachinist
.0005 .000375
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Assignment #7Due:
IndividualAssignmentsPrepare 1 page (12pt. Font, 1.5 linespacing ) for EACH industry presentation
you attended on February 6th
.(See web page for exact time andlocation for each company)