1 Determine the utilization and the efficiency for each of t

1. Determine the utilization and the efficiency for each of these

situations:

(a) A loan processing operation that processes an average of 6 loans

per day. The operation has a design capacity of 10 loans per day and an

effective capacity of 8 loans per day.

(b) A furnace repair team that services an average of four furnaces a

day if the design capacity is six furnaces a day and the effective

capacity is five furnaces a day.

[Hint: Please read Example 1 on page 189 in the text book.]

Please solve the following problem related to cost-volume analysis

2. A producer of pens has fixed costs of $36,000 per month which are

allocated to the operation and variable costs are $0.80 per pen.

(a) Find the break-even quantity if pens sell at $2.0 each.

(b) Find the profit if the company produces 35,000 pens and pens sell

at $2.0 each?

Show work as well

Q1)

a) Processing loans = 6/day

Design capacity = 10/day

Effective capacity = 8/day

Utilization = (6/10)*100 = 60%

Efficiency = (6/8)*100 = 75%

b) Average furnaces sold = 4/day

Design capacity = 6/day

Effective capacity = 5/day

Utilization = (4/6)*100 = 66.67%

Efficiency = (4/5)*100 = 80%

Q2) Fixed cost = 36000 $/month

Variable cost = 0.8$/pen

a) Breakeven quantity = (Fixed Cost)/(Selling price - Variable cost) = 36000/(2-0.8) = 30000 units

b) Profit = Revenue - Costs = Revenue - (Fixed cost+Variable cost) = (2*35000)-(36000+(0.8*35000)) = 6000 $