Kim's Convenience store has a variable demand. On a given day, demand ranges from 270 to 330 customers a day who average purchasing 5 items each. The average daily demand is 300 customers. The convenience store currently operates 12 hours a day. Each order takes approximately 2 minutes.
Required
1. What is the average customer waiting time, in minutes? 
2. What is the cycle time for an order? 
3. What is the waiting time if the average daily demand remains at 300 customers?

Question
Fit-For-A-King Inc. manufactures foam products for several upholstery companies. This company has two workstations, mixing/heating and cutting/assembly. The mixing/heating station is limited by the capacity of the equipment. Cutting/assembly is limited by the speed of the cutting machine workers. Cutting/assembly normally lags behind mixing/heating. Because the demand has increased in recent months, management is considering adding another person to cutting/assembly. This would increase the department's costs by $4,000 a month. If the person is moved from mixing/heating, that department's cost would decline by $3,000. By keeping mixing/heating laborer's the same, the department can increase production on-call by 10 percent. Current idle time in mixing/heating averages one-half person a day for a net cost of $1,400 a month.
Required
1. What is the net effect of moving the employee from mixing/heating to cutting/assembly?
2. What is the net effect if a new employee is hired for cutting/assembly?

Question 3.3      
Sneaky Snacky Squirrel Inc. has a budget of $900,000 in 2021 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $80,000 in variable costs. The new method will require $40,000 in training costs and $100,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 150,000 units.

Appraisal costs for the year are budgeted at $600,000. The new prevention procedures will save appraisal costs of $50,000. Internal failure costs average $15 per failed unit of finished goods. The internal failure rate is expected to be 3% of all completed items. The proposed changes will cut the internal failure rate by one-third. Internal failure units are destroyed. External failure costs average $54 per failed unit. The company's average external failures average 3% of units sold. The new proposal will reduce this rate by 50%. Assume all units produced are sold and there are no ending inventories.

Required:

1. What is the net change in the budget of prevention costs if the procedures are automated in 2021? Will management agree with the changes?

2. How much will internal failure costs change if the internal product failures are reduced by 1/3 with the new procedures? 

3. How much do external failure costs change if all changes are as anticipated with the new prevention procedures? Assume all units produced are sold and there are no ending inventories.

Answer rating: 100% (QA)

Solution for Question 1 To find the average customer waiting time we need to first calculate the cycle time Cycle time Operating time per day Producti... View the full answer