Task $6$: Evaluate the contribution per cycle in each case:

Case F$1$:

Revenue per cycle $=8$ x $30=240$

Cost per cycle $($test$)=4$

Depreciation per cycle $=12\mathrm{.}64$ x $(1,000/(52$x$3))=81$

Contribution per cycle $=240-(4+50+81)=105$

Contribution per week $=105/12\mathrm{.}64=8\mathrm{.}31$

Case F$2$:

Revenue per cycle $=8$ x $30=240240$

Cost per cycle $($Repair cost$)=150150$

Depreciation per cycle $=18\mathrm{.}58$ x $(1,000/156)=119119$

Contribution per cycle $=240-(50+150+119)=-79-79$

Contribution per week $=-79/18\mathrm{.}58=-4\mathrm{.}25-4\mathrm{.}25$

Case F$3$:

Revenue per cycle $=8$ x $30=240240$

Cost per cycle $($Repair cost$)=150150$

Depreciation per cycle $=16\mathrm{.}44$ x $(1,000/156)=105105$

Contribution per cycle $=240-(50+150+105)=-65-65$

Contribution per week $=-65/16\mathrm{.}44=-3\mathrm{.}96-3\mathrm{.}98$

Based on the contribution margins, every computer going through repairs is currently generating a loss.

Computers that are misclassified generate a bigger loss than those that are not because of longer flow time.

Start of Section$2$

Demand drops to $600$ per week

As demand drops to $600$ units per week, CRU will have an excess of computers. One option is to sell off the excess and only retain those

required to support a flow of $600$ units per week. We assume that as demand drops, the time spent in various buffers is the same as before.

The flow time as an operational measure is maintained at each station. The resulting inventories at various stages are shown Table $2.$

Table $2$:

customer receiving status$24$ status$40$ parts suppliers status$41$ status$42$ status$20$

"throughtput

$($units$/$week$)"600600420243243243243243600$

"inventory

$($units$)"48003009006003002435433001200$

"flow time

$($weeks$)"80\mathrm{.}52\mathrm{.}142\mathrm{.}471\mathrm{.}231\mathrm{.}002\mathrm{.}231\mathrm{.}232\mathrm{.}00$

Task $7$: Fill in the orange$-$colored cells based on the above data,

total number of units $($obtained by adding the units at each stage$)=$

number on rent $($units at customers$)=$

So$,$ utilization $($units with the customer $/$ total units owned$)=$

The assumption here is that all extra computers are sold off and the flow time at every state is the same as in Table $1.$ From the above analysis,

it is clear that as a result of this change in revenues, costs as well as profits would drop to $60$ percent of what they were before. Thus,

Revenues per week $=$

Depreciation per week $=$

Other costs per week $=$

Profits per week $=$

If no action, other than the disposal of the excess units is taken, the profits decline to the value in D$157$ per week.

Targeting the short$-$term market

CRU decided to target the short$-$term market. The average term in this market is four weeks with a weekly rental of $$35/$week$.$

Each week, $600$ units rent for an eight$-$week term and $800$ units rent for a four$-$week term. We evaluate the number of units at various stages

in the process. We assume that the time spent in each buffer is the same as in Table $1.$

Also assume that extra computers are purchased to support the flow.

Table $3$:

customer receiving status$24$ status$40$ parts suppliers status$41$ status$42$ status$20$

"throughtput

$($units$/$week$)"140014009805675675675675671400$

"inventory

$($units$)"07002100140070056712677002800$

"flow time

$($weeks$)"0\mathrm{.}52\mathrm{.}142\mathrm{.}471\mathrm{.}231\mathrm{.}002\mathrm{.}231\mathrm{.}232\mathrm{.}00$

Task $8$: Fill in the orange$-$colored cells based on the above data,

total number of units $($obtained by adding the units at each stage$)=$

number on rent $($units at customers$)=$

So$,$ utilization $($units with the customer $/$ total units owned$)=$

Now evaluate revenues and costs.

Revenue:

Revenue per week $=$ number on rent x rental per week $=($revenue from $8-$week rental is $$30$ and revenue from $4-$week is $$35)$

Costs:

Cost per week $=$ shipping cost $+$ receiving cost $+$ pre$-$configuration cost $+$ repair cost $+$ depreciation $=$

Shipping cost per week $=1400$ x $25=$

Receiving cost per week $=1400$ x $25=$

Pre$-$configuration cost per week $=($cost for conversion from status $24$ to status $20)$

Repair cost per week $=$

Depreciation per week $($total units x depreciation$/$unit$/$week$)=$

Profit per week $=$ Revenue $-$ Cost $=$