The following are important operational considerations

The following are important operational considerations EXCEPT:

Question 1 options:

Capacity size

Working hours

Sole proprietorship or corporation

Scheduling

Make or buy

Question 2 (1 point)

Saved

Which of the following legal forms exposes business owners to the highest personal liability in issues related to business failure or business obligations towards others:

Question 2 options:

Corporation

Sole proprietorship

N.G.O.

L.L.C.

Franchise and Buyout

Question 3 (1 point)

Saved

The franchisee has more control than the franchisor over which of the following factors?

Question 3 options:

specifications of quality and service mix

sources of supply for products and services

selection of employees working in the branch which she/he owns and operates

geographic location and protected territory

Question 4 (1 point)

Saved

Which of the following describes a franchisee in the franchise system?

Question 4 options:

Distributor of the rights to the franchise system to others who would like to benefit from the franchise brand and business model success

Owner of the rights to the franchise system

Seller of the rights to the franchise system to others who would like to benefit from the franchise brand and business model success

Buyer of the rights to use the franchise system and benefit from the franchise brand and business model success

Question 5 (5 points)

Saved

Buyout Mini Case Study

You are considering to buy out a failing business. Your analysis shows that if you invest $40,000 in this business today, you can turn around the business which a result will generate net profit of $200,000 in year 5 (only once after 5 years). While the bank interest rate for time deposits is 2% annually, you should consider an additional premium of 8% to accommodate for the risks associated with buying and running this business. Based on a 5-year DCF (discounted cash flow) evaluation, roughly, what is the maximum value you would be willing to pay now for this business?

Question 5 options:

$63,000

$51,000

$106,000

$84,000

$220,000

$177,000

$160,000

Operational Model Mini Case Studies

Wake Up Cup Café Working Hours

Wake Up Cup Café currently operates 1 shift from 12 to 8 pm
Sales of 1 shift: $840 per day
If it operates 2 shifts, it can work from 8 AM to 11 pm
Sales of 2 shifts: $1,340
Fixed Costs $2,000 per month

The following table summarizes costs per day

Cost per day

1 shift

2 shifts

Labor

360

720

Material

200

360

Variable Overhead

100

160

Question 6 (2 points)

Wake Up Cup Café:

What are the marginal profits of operating the 2nd shift?

Question 6 options:

$120

-$80

$260

-$180

$100

Question 7 (1 point)

Wake Up Cup Café:

What are the profits of operating 1 shift (current situation)?

Question 7 options:

$140 per shift

$260 per shift

$120 per shift

$180 per shift

Question 8 (1 point)

Wake Up Cup Café:

What are the profits of operating 2 shifts?

Question 8 options:

$180 per day

$140 per shift

$120 per shift

$260 per day

$100 per day

Nature's Best Granola Case Study

You expect your sales to be 4,000,000 granola bars (20 g each) per month. You have identified a machine which does the baking and packaging with a capacity of 125 kg/hr. Each machine requires 2 workers to operate it and needs 8 ft x 40 ft space. Cost to buy and install one machine is $20,000. Energy consumption is $3 per hour. Cost of material and packaging is $0.12 per 20g bar. You decided to have only 1 shift of 8 hours per day. Each month has 20 working days. Average salary per operator is $3,000 per month.

Question 9 (2 points)

Nature's Best Granola Case Study:

How many operators do you need for the production line?

Question 9 options:

12

8

10

2

6

4

Question 10 (2 points)

Nature's Best Granola Case Study:

What is the cost of labor required to operate the production line per month?

Question 10 options:

$12,000

$6,000

$18,000

$24,000

$36,000

$30,000

Question 11 (2 points)

Nature's Best Granola Case Study:

What is the cost of buying and installing the production line?

Question 11 options:

$60,000

$80,000

$40,000

$120,000

$20,000

$100,000

Question 12 (2 points)

Nature's Best Granola Case Study:

If you require a storage area of 600 sq. ft., and with an average rent $12 per sq. ft./month, what is the estimated cost of rent per month for the production line including the storage area. (Rounded to the nearest $1000)

Question 12 options:

$11,000 per month

$26,000 per month

$15,000 per month

$30,000 per month

$23,000 per month

$19,000 per month

Make or Buy: Keyboard Manufacturer

A company manufactures Keyboards. It has production capacity of 30,000 units per month

Fixed Costs: $60,000 per month

Selling Price of each keyboard: $15.00 per unit

The following table summarizes cost of manufacturing in-house.

Item

Cost, $/Units

Material5.50
Labor1.75
Variable overhead0.75

An external vendor (a different manufacturer) has offered to supply the keyboards at $8.50 per unit.

Question 13 (2 points)

Saved

Make or Buy: Keyboard Manufacturer:

If the company could utilize the spare capacity in producing 30,000 modems, with variable cost $12 per unit. What should the company do, knowing that it can sell the modems at $22 per unit?

Question 13 options:

Dedicate 25% of the capacity for making keyboards and 75% for making modems

Dedicate 50% of the capacity for making keyboards and 50% for making modems

Dedicate 100% of the capacity for making keyboards

Make the modems and buy the keyboards from the external vendor

Question 14 (2 points)

Saved

Make or Buy: Keyboard Manufacturer

If the manufacturing capacity can only be utilized in manufacturing the keyboards, the company should:

Question 14 options:

Neither make or buy

Make the keyboards because the variable cost of manufacturing in-house is lower than outsourcing

Buy the keyboards because the company will save by using outsourcing

Both options (make or buy) cost the same