Q&A Hero

Q: The assembly line is a classic example of a repetitive process.

Q: A value-stream map includes both (1) inventory quantities, and (2) symbols for customers and suppliers.

Q: Harley-Davidson, because it has so many possible combinations of products, utilizes the process strategy of mass customization.

Q: The typical full-service restaurant uses a product-focused process.

Q: In process-focused facilities, equipment utilization is low.

Q: The expected amount of time to recover the initial amount of an investment is called the: A.Amortization period. B.Payback period. C.Interest period. D.Budgeting period. E.Discounted cash flow period.

Q: Intermittent processes are organized around processes.

Q: Porter Co. is analyzing two projects for the future. Assume that only one project can be selected. Project X Project Y Cost of machine $68,000 $60,000 Net cash flow: Year 1 24,000 4,000 Year 2 24,000 26,000 Year 3 24,000 26,000 Year 4 0 20,000 The payback period in years for Project X is: A.2.00. B.3.83. C.3.50. D.2.83. E.4.00.

Q: A firm's process strategy is its approach to transforming resources into goods and services.

Q: Mary is considering purchasing a machine from two suppliers. Supplier A's machine has an annual fixed cost of $10,000 and a unit variable cost of $2.10. Supplier B's machine has an annual fixed cost of $16,000 and a unit variable cost of $3.00. How large should Mary's annual demand be in order to make Supplier B's machine the better choice?

Q: Karla's candle factory is considering two different machines. Machine A is highly automated with FC of $25,000 and VC of $.1/candle. Machine B is actually no machine but rather hand labor with FC of $10,000 and VC of $.5/candle. If demand for Karla's candles is 25,000, which machine should she pick?

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Q: Bridget is considering how to get to work over the summer. She has two options. Option A is to buy a seasonal bus pass for $100. Option B is to pay $.25 for each ride. Identify the fixed and variable costs for each option. If she has to ride both to and from work, how many days of work would it take for the seasonal pass to cost the same amount as Option B?

Q: Kirstin is thinking about opening a Chinese restaurant and needs to buy a rice cooker. Machine A has fixed costs of $100 and variable costs of $1/pound. Machine B has fixed costs of $500 and variable costs of $.1/pound. If Kirstin plans to sell 100 pounds of rice which machine should she choose? What is the cross-over point?

Q: A _______________________________ is the combination of products sold by a company.

Q: A non-profit organization is planning a raffle to raise money. It has two options for tickets. The first option is to do the tickets by hand, with fixed costs of $50 and variable costs of $.05 per ticket. The second option is to outsource production. This would result in fixed costs of $500 and variable costs of $.01. If the organization plans to sell 10,000 tickets which option should it choose?

Q: Costs already incurred in manufacturing the units of a product that do not meet quality standards are _________________________ costs.

Q: Brandon's computer shop is considering two different configuration options. The first one is to have each computer built by the sales associates when they have free time. The second option is to hire a dedicated assembly technician. Option A has variable costs of $50 per computer and no fixed costs. Option B has a fixed cost of $1,000 but variable costs of only $5 per computer. What is the cross-over point?

Q: __________________________ costs are amounts that will continue even if a segment is eliminated.

Q: A product is currently made in a process-focused shop, where fixed costs are $8,000 per year and variable cost is $40 per unit. The firm currently sells 200 units of the product at $200 per unit. A manager is considering a repetitive focus to lower costs (and lower prices, thus raising demand). The costs of this proposed shop are fixed costs = $24,000 per year and variable costs = $10 per unit. If a price of $80 will allow 400 units to be sold, what profit (or loss) can this proposed new process expect? Do you anticipate that the manager will want to change the process? Explain.

Q: A(n) _____________________ arises from a past decision and cannot be avoided or changed; it is irrelevant to future decisions.

Q: An organization is considering three process configuration options. There are two different intermittent processes, as well as a repetitive focus. The smaller intermittent process has fixed costs of $3,000 per month, and variable costs of $10 per unit. The larger intermittent process has fixed costs of $12,000 per month and variable costs of $2 per unit. A repetitive focus plant has fixed costs of $50,000 and variable costs of $1 per unit. a. If the company produced 20,000 units, what would be its cost under each of the three choices? b. Which process offers the lowest cost to produce 40,000 units? What is that cost?

Q: A firm is about to undertake the manufacture of a product, and is weighing the process configuration options. There are two intermittent processes under consideration, as well as a repetitive focus. The smaller intermittent process has fixed costs of $3,000 per month, and variable costs of $10 per unit. The larger intermittent process has fixed costs of $12,000 and variable costs of $2 per unit. A repetitive focus plant has fixed costs of $50,000 and variable costs of $1 per unit. a. At what output does the large intermittent process become cheaper than the small one? b. At what output does the repetitive process become cheaper than the larger intermittent process?

Q: The local convenience store makes personal pan pizzas. Currently, their process makes complete pizzas, fully cooked, for the customer. This process has a fixed cost of $20,000, and a variable cost of $1.75 per pizza. The owner is considering a different process that can make pizzas in two ways: completely cooked (as before), or partially cooked and then flash frozen, for the customer to finish at home. This alternate process has a fixed cost of $24,000, but a lower variable cost (because much less energy is used in baking) of $1.25 per pizza. a. What is the crossover point between the existing process and the proposed process? b. If the owner expects to sell 9,000 pizzas, should he get the new oven?

Q: Big John's Manufacturing currently produces its lead product on a machine that has a variable cost of $0.32 per unit, and fixed costs of $75,000. Big John is considering purchasing a new machine that will drop the variable cost to $.28 per unit, but has a fixed cost of $150,000. What is the cross-over point between the two machines?

Q: Marshall Company currently manufactures one of its parts at a cost of $3.25 per unit. This cost is based on a normal production rate of 50,000 units. Variable costs are $2.10 per unit, fixed costs related to making this part are $40,000 per year, and allocated fixed costs are $45,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Marshall is considering buying the part from a supplier for a quoted price of $2.80 per unit guaranteed for a three-year period. Should the company continue to manufacture the part, or should it buy the part from the outside supplier? Support your answer with analyses.

Q: A product is currently made in a process-focused shop, where fixed costs are $9,000 per year and variable cost is $50 per unit. The firm is considering a fundamental shift in process, to repetitive manufacture. The new process would have fixed costs of $90,000, and variable costs of $5. What is the crossover point for these processes? For what range of outputs is each process appropriate?

Q: How are environmental issues linked to the process choice? Won't being an environmentally conscious firm drive up costs and take away any competitive advantage? Discuss, with examples to support your position.

Q: Mays Company can sell all of product A that it produces but only 160,000 units of Z and it has limited production capacity. It can produce 6 units of A per hour or 10 units of Z per hour, and it has 30,000 production hours available. Contribution margin per unit is $12 for A and $10 for Z. What is the most profitable sales mix for this company?

Q: Why do modern operations managers look for flexibility in their equipment?

Q: Identify five examples of technology's impact on services. Specifically, identify one of these that has led to labor cost reductions. Discuss briefly. Can you add an item, not identified in the textbook, to this list?

Q: Describe some major challenges to implementing a successful build-to-order system?

Q: Explain, in your own words, what a flexible manufacturing system is. List the benefits of flexible manufacturing systems.

Q: A company is planning to introduce a new portable computer to its existing product line. Management must decide whether to make the computer case or buy it from an outside supplier. The lowest outside price is $90. If the case is produced internally, the company will have to purchase new equipment that will yield annual depreciation of $130,000. The company will also need to rent a new production facility at $200,000 a year. At 20,000 cases per year, a preliminary analysis of production costs shows the following: Per Case Direct materials $ 40.00 Direct labor 32.00 Variable overhead 10.00 Equipment depreciation 6.50 Building rental 10.00 Allocated fixed overhead 7.50 Total cost $106.00 Required: (1) Determine whether the company should make the cases or buy them from the outside supplier. (2) What other factors, besides cost, should the company consider?

Q: Identify the techniques for improving service productivity. For any two techniques, describe in a short paragraph, and include an example.

Q: Generalware, Inc. sells a single product and reports the following results from sales of 100,000 units: Sales ($45 unit) "u00a6"u00a6"u00a6"u00a6.."u00a6"u00a6"u00a6"u00a6"u00a6."u00a6 $4,500,000 Less costs and expenses: Direct materials ($16/unit)"u00a6"u00a6"u00a6"u00a6."u00a6 $1,600,000 Direct labor ($9/unit)"u00a6"u00a6"u00a6"u00a6"u00a6."u00a6."u00a6 900,000 Variable overhead ($3/unit)"u00a6"u00a6."u00a6"u00a6.. 300,000 Fixed overhead ($8.10/unit)"u00a6"u00a6.......... 810,000 Variable administrative ($4.50/unit)"u00a6. 450,000 Fixed administrative ($4/unit)"u00a6"u00a6"u00a6... 400,000 Total costs and expenses"u00a6"u00a6"u00a6"u00a6"u00a6... $(4,460,000) Operating income"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6 $ 40,000 A foreign company wants to purchase 15,000 units. However, they are willing to pay only $36 per unit for this one-time order. They also agree to pay all freight costs. To fill the order, Generalware will incur normal production costs. Total fixed overhead will have to be increased by $60,000 to pay for equipment rentals and insurance. No additional administrative costs (variable or fixed) will be incurred in association with this special order. Required: (1) Should Generalware accept the order if it does not affect regular sales? Explain. (2) Assume that Generalware can accept the special order only by giving up 5,000 units of its normal sales. Should the company accept the special order under these circumstances?

Q: Identify the advances being made in technology to enhance production.

Q: Luxury Linens has three departments: Bath, Kitchen, and Bedding. The most recent income statement, showing the total operating profit and departmental results is shown below: Total Bath Kitchen Bedding Sales $2,100,000 $1,000,000 $500,000 $600,000 Cost of goods sold (1,260,000) (500,000) (360,000) (400,000) Gross profit 840,000 500,000 140,000 200,000 Direct expenses (420,000) (200,000) (120,000) (100,000) Allocated expenses (325,000) (100,000) (150,000) (75,000) Net income (loss) $ 95,000 $ 200,000 $(130,000) $25,000 Based on this income statement, management is considering eliminating the Kitchen department. If the Kitchen department is eliminated, the other departments will expand to fill the space but sales are not expected to change. Twenty percent of Kitchen's allocated expenses will be avoided due to restructuring and the remainder reallocated equally to Bath and Bedding. Show an analysis indicating whether the Kitchen department should be eliminated.

Q: Identify the typical elements in a process control system.

Q: Spilker Linens Store has three departments: Bath, Kitchen, and Bedding. The most recent income statement, showing the total operating profit and departmental results is shown below: Total Bath Kitchen Bedding Sales $2,100,000 $1,000,000 $600,000 $500,000 Cost of goods sold (1,260,000) (500,000) (400,000) (360,000) Gross profit 840,000 500,000 200,000 140,000 Direct expenses (420,000) (200,000) (100,000) (120,000) Allocated expenses (350,000) (100,000) (75,000) (175,000) Net income (loss) $ 70,000 $ 200,000 $ 25,000 $(155,000) Based on this income statement, management is planning on eliminating the Bedding department, as it is generating a net loss. If the Bedding department is eliminated, the Kitchen department will expand to fill the space, but sales will not change in total, nor will direct expenses. None of Bedding's allocated expenses will be avoided, but they will be reallocated to Bath and Kitchen. Bath will be allocated $100,000 additional expenses, and Kitchen will be allocated $75,000 additional expenses. Prepare a new income statement for Spilker Linens Store, showing the results if the Bedding Department is eliminated and indicate whether eliminating the department is advisable.

Q: Provide an example of the postponement strategy for improving service productivity.

Q: Provide an example of the focus strategy for improving service productivity.

Q: Name the tools of process analysis and design. Describe them in a sentence or two each.

Q: In an affluent society, how do we produce a wide number of options for products at low cost?

Q: Variations Company had the following results of operations for the past year: Sales (8,000 units at $7.00) $ 56,000 Variable manufacturing costs (30,000) Fixed manufacturing costs (6,000) Fixed selling and administrative expenses (4,500) Operating income $ 15,500 A foreign company (whose sales will not affect Variations' regular sales) offers to buy 700 units at $4.00 per unit. In addition to variable manufacturing costs, there would be an export cost of $0.30 per unit. Prepare an analysis of this additional business to show whether Variations should take this order.

Q: The textbook described four basic process models, and hinted that there are others. Construct an example of a hybrid process. Can this process be applied in any well-known organization? How common do you think hybrid processes are?

Q: Goodfellow Company had the following results of operations for the past year: Sales (8,000 units at $6.80) $ 54,400 Materials and direct labor (20,000) Overhead (40% variable) (10,000) Selling and administrative expenses (all fixed) (6,000) Operating income $ 18,400 A foreign company (whose sales will not affect Goodfellow's regular sales) offers to buy 2,000 units at $5.00 per unit. In addition to variable manufacturing costs, there would be shipping costs of $1,200 in total on these units. Prepare an analysis of this additional business to show whether Goodfellow should take this order.

Q: Compare an intermittent process to a continuous process on the basis of variety, volume, equipment utilization, and inventory.

Q: Why is equipment utilization in process-focused service industries often low?

Q: A company inadvertently produced 6,000 defective portable radios. The radios cost $10 each to be manufactured. A salvage company will purchase the defective units as they are for $8 each. The production manager reports that the defects can be corrected for $4.50 per unit, enabling the company to sell them at the regular price of $15.00. The repair operations would not affect other production operations. Prepare an analysis that shows which action should be taken.

Q: Name the four basic process strategies; describe them in a complete sentence or two each.

Q: How are modules useful in manufacturing processes?

Q: Rocko Inc. has a machine with a book value of $50,000 and a five-year remaining life. A new machine is available at a cost of $85,000 and Rocko can also receive $38,000 for trading in the old machine. The new machine will reduce variable manufacturing costs by $14,000 per year over its five-year life. Should the machine be replaced? A. Yes, because income will increase by $14,000 per year. B. Yes, because income will increase by $23,000 in total. C. No, because the company will be $23,000 worse off in total. D. No, because the income will decrease by $14,000 per year. E. Rocko will be not be better or worse off by replacing the machine.

Q: Describe Value-Stream Mapping. Explain how it is different from process mapping.

Q: What is the link between focused processes and specialization? What kinds of focus are possible?

Q: What decision rule should be followed when deciding if a business segment should be eliminated? A. Segments generating a net loss should always be eliminated. B. Segments with revenues that are more than avoidable expenses should be considered for elimination. C. Segments with revenues that are more than unavoidable expenses should be considered for elimination. D. Segments with revenues that are less than avoidable expenses should be considered for elimination. E. Segments with revenues that are less than unavoidable expenses should be considered for elimination.

Q: Why is Harley-Davidson identified as a repetitive manufacturer, not a mass customizer?

Q: The Mad Hatter Company owns a machine that manufactures two types of chimney caps. Production time is .20 hours for cap A and .40 hours for cap B. The machine's capacity is 2,000 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 1,000 units of cap A and 6,000 units of cap B. Selling prices and variable costs per unit are shown below. Based on this information, what is the Mad Hatter's most profitable sales mix? Cap A Cap B Selling price per unit $80 $60 Variable costs per unit 53 42 A. 10,000 units of cap A. B. 5,000 units of cap B. C. 1,000 units of cap A and 5,000 units of cap B. D. 1,000 units of cap A and 6,000 units of cap B. E. 1,000 units of cap A and 4,500 units of cap B.

Q: __________ is the fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance.

Q: Bandy Corporation owns a machine that manufactures lawn games. Production time for the croquet set is 10 units per hour and for the volley ball game is 8 units per hour. The machine's capacity is 1,500 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 4,000 croquet sets and 10,000 volleyball games. Selling prices and variable costs per unit are shown below. Based on this information, what is Bandy Corporation's most profitable sales mix? Croquet Set Volleyball Game Selling price per unit $75 $62 Variable costs per unit 42 25 A. 15,000 croquet sets. B. 12,000 volleyball games. C. 4,000 croquet sets and 10,000 volleyball games. D. 4,000 croquet sets and 8,800 volleyball games. E. 2,500 croquet sets and 10,000 volleyball games.

Q: A(n) __________ uses an automated work cell controlled by electronic signals from a common centralized computer facility.

Q: A company has already incurred a $55,000 cost in partially producing its three products. Their selling prices when partially and fully processed are shown in the following table with the additional costs necessary to finish their processing. Based on this information, should any products be processed further? Product Unfinished Selling Price Finished Selling Price Further Processing Costs A $72 $108 $35 B 83 124 42 C 94 141 45 A. All of these products should be processed further. B. None of these products should be processed further. C. Products A and B should be processed further. D. Products B and C should be processed further. E. Products A and C should be processed further.

Q: __________ is a computer-controlled warehouse that provides for the automatic placement of parts into and from designated places within the warehouse.

Q: Derby Inc. manufactures a product which contains a small part. The company has always purchased this motor from a supplier for $125 each. Derby recently upgraded its own manufacturing capabilities and now has enough excess capacity (including trained workers) to begin manufacturing the motor instead of buying it. The company prepared the following per unit cost projections of making the motor, assuming that overhead is allocated to the part at the normal predetermined overhead rate of 150% of direct labor cost. Direct materials $38 Direct labor 50 Overhead (fixed and variable) 75 Total $163 The required volume of output to produce the motors will not require any incremental fixed overhead. Incremental variable overhead cost is $21 per motor. What is the effect on income if Derby decides to make the motors? A. Income will decrease by $16 per unit. B. Income will increase by $16 per unit. C. Income will increase by $23 per unit. D. Income will decrease by $23 per unit. E. Income will increase by $39 per unit.

Q: __________ is the use of information technology to control a physical process.

Q: Wade Company is operating at 75% of its manufacturing capacity of 140,000 product units per year. A customer has offered to buy an additional 20,000 units at $32 each and sell them outside the country so as not to compete with Wade. The following data are available: Costs at 75% capacity: Per Unit Total Direct materials $12.00 $1,260,000 Direct labor 9.00 945,000 Overhead (fixed and variable) 15.00 1,575,000 Totals $36.00 $3,780,000 In producing 20,000 additional units, fixed overhead costs would remain at their current level but incremental variable overhead costs of $6 per unit would be incurred. What is the effect on income if Wade accepts this order? A. Income will decrease by $4 per unit. B. Income will increase by $4 per unit. C. Income will increase by $5 per unit. D. Income will decrease by $5 per unit. E. Income will increase by $11 per unit.

Q: __________ involves the ability to respond with little penalty in time, cost, or customer value.

Q: The strategy for improving service productivity that customizes at delivery, rather than at production, is __________.

Q: Assume markup percentage equals desired profit divided by total costs. What is the correct calculation to determine the dollar amount of the markup per unit? A. Total cost times markup percentage. B. Total cost per unit times markup percentage per unit. C. Total cost per unit divided by markup percentage per unit. D. Markup percentage per unit divided by total cost per unit. E. Markup percentage divided by total cost.

Q: __________ is a process analysis technique that focuses on the customer and the producer's interaction with the customer.

Q: To determine a product selling price based on the total cost method, management should include: A. Total production and nonproduction costs plus a markup. B. Total production and nonproduction costs only. C. Total production costs plus a markup. D. Total nonproduction costs plus a markup. E. Only a markup.

Q: A special form of time-function mapping, which goes beyond the organization into its supply chain, is __________.

Q: Beta Inc. can produce a unit of Zed for the following costs: Direct material $ 10 Direct labor 20 Overhead 50 Total costs per unit $80 An outside supplier offers to provide Beta with all the Zed units it needs at $58 per unit. If Beta buys from the supplier, it will still incur 40% of its overhead. Beta should: A. Buy Zed since the relevant cost to make it is $60. B. Make Zed since the relevant cost to make it is $60. C. Buy Zed since the relevant cost to make it is $80. D. Make Zed since the relevant cost to make it is $30. E. Buy Zed since the relevant cost to make it is $30.

Q: Granfield Company has a piece of manufacturing equipment with a book value of $40,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $22,000. Granfield can purchase a new machine for $120,000 and receive $22,000 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $19,000 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is: A. $22,000 decrease B. $76,000 increase C. $18,000 decrease D. $52,000 increase E. $22,000 increase

Q: A(n) __________ uses symbols to analyze the movement of people or material.

Q: Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42,000. The division sales for the year were $960,000 and the variable costs were $475,000. The fixed costs of the division were $527,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield's operating income for eliminating this business segment would be: A. $485,000 decrease B. $210,800 increase C. $274,200 decrease D. $485,000 increase E. $274,200 increase

Q: __________ represent an organization's attempt to gain increased efficiency through specialization, which can include, for example, concentrating on certain classes of customers.

Q: __________ is a rapid, low-cost production process that caters to constantly changing unique customer desires.

Q: Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $3,000. The division sales for the year were $1,050,000 and the variable costs were $860,000. The fixed costs of the division were $193,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be: A. $57,900 decrease B. $132,100 decrease C. $54,900 decrease D. $190,000 increase E. $190,000 decrease

Q: __________ is a process strategy that uses a product-oriented production process that uses modules.