1. Determine the utilization and the efficiency for each of these situations:
a. A loan processing operation that processes an average of 7 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.
c. Would you say that systems that have higher efficiency ratios than other systems will always
have higher utilization ratios than those other systems? Explain.

3. A producer of pottery is considering the addition of a new plant to absorb the backlog of demand that now exists. The primary location being considered will have fixed costs of $9,200 per month and variable costs of 70 cents per unit produced. Each item is sold to retailers at a price that averages 90 cents.
a. What volume per month is required in order to break even?
b. What profit would be realized on a monthly volume of 61,000 units? 87,000 units?
c. What volume is needed to obtain a profit of $16,000 per month?
d. What volume is needed to provide a revenue of $23,000 per month?
e. Plot the total cost and total revenue lines.


5. A producer of felt-tip pens has received a forecast of demand of 30,000 pens for the coming month from its marketing department. Fixed costs of $25,000 per month are allocated to the felt-tip opera- tion, and variable costs are 37 cents per pen.
a. Find the break-even quantity if pens sell for $1 each.
b. At what price must pens be sold to obtain a monthly profit of $15,000, assuming that estimated demand materializes?

Answer rating: 100% (QA)

1 a Utilization is calculated as the average output divided by the design capacity Utilization Average output Design capacity 100 Utilization 7 loans per day 10 loans per day 100 Utilization 70 Effici... View the full answer