Q&A Hero

Q: Preston Company is analyzing two alternative methods of producing its product. The production manager indicates that variable costs can be reduced 40% by installing a machine that automates production, but fixed costs would increase. Alternative 1 shows costs before installing the machine; Alternative 2 shows costs after the machine is installed. (a) Compute the break-even point in units and dollars for both alternatives. (b) Prepare a forecasted income statement for both alternatives assuming that 30,000 units will be sold. The statements should report sales, total variable costs, contribution margin, fixed costs, income before taxes, income taxes, and net income. Below the income statement, compute the degree of operating leverage. Which alternative would you recommend and why? Alternative 1 Alternative 2 Variable costs per unit $20 ? Fixed costs $200,000 $274,400 Selling price per unit $40 $40 Income tax rate 25% 25%

Q: Which of the following is not a common queuing situation? A) grocery shoppers being served by checkout clerks B) commuters slowing or stopping at toll plazas to pay highway tolls C) machinery waiting to be repaired or maintained D) parcel delivery truck following its computer-generated route E) patients in a health clinic waiting to see one of several doctors

Q: Whiting Company sells a mix of three related products. Total fixed costs are $144,000. The following additional information is available for Whiting Company. Sales Mix Variable Sales Cost/Unit Price/Unit X 4 $4 $9 Y 4 $8 $14 Z 2 $7 $15 Use the weighted average method to determine the company's break-even point for composite units.

Q: Study of waiting-line models helps operations managers better understand A) service systems such as bank teller stations B) maintenance activities that might repair broken machinery C) shop-floor control activities D) service systems such as amusement park rides E) all of the above

Q: Varigon Co. produces and sells three productsHousehold, Commercial, and Industrial, and has total fixed costs of $52,000. Sales and cost data follow: Household Commercial Industrial Sales price per unit"u00a6"u00a6"u00a6.. $6 $8 $10 Variable costs per unit"u00a6"u00a6 4 6 7 Sales mix"u00a6"u00a6"u00a6"u00a6"u00a6.."u00a6.. 3 2 1 Calculate the break-even point in composite units.

Q: A finite population waiting line model has an average service time T of 100 minutes and an average time between service requirements U of 400 minutes; the service factor X is 0.25.

Q: Benjamin Co. has three products A, B, and C, and its fixed costs are $69,000. The sales mix for its products are 3 units of A, 4 units of B, and 1 unit of C. Information about the three products follows: A B C Projected sales in dollars"u00a6.. $192,000 $192,000 $64,000 Selling price per unit"u00a6"u00a6"u00a6. $40 $30 $40 Contribution margin ratio"u00a6... 30% 35% 35% (a) Calculate the company's break-even point in composite units and sales dollars. (b) Calculate the number of units of each individual product to be sold at the break-even point.

Q: An M/M/1 model and an M/D/1 model each have an arrival rate of 1 per minute and a service rate of 3 per minute; the average queue length of the M/M/1 will be twice that of the M/D/1.

Q: The greater the margin by which the arrival rate exceeds the service rate, the better the performance of the waiting line.

Q: The sales mix of Desert Springs Company is 5 units of A, 3 units of B, and 1 unit of C. Per unit sales prices for each product are $30, $40, and $50, respectively. Variable costs per unit are $14, $24, and $34, respectively. Fixed costs are $597,600. What is the break-even point in composite units and in units of A, B, and C?

Q: In the M/M/1 waiting line model with an arrival rate of 2 per hour and a service rate of 6 per hour, the utilization factor for the system is approximately 0.333.

Q: Four of the most widely used waiting line modelsM/M/1 or A, M/M/S or B, M/D/1 or C, and Limited population or Dall share three characteristics: Poisson arrivals, FIFO discipline, and exponential service times.

Q: As the average service rate u03bc grows larger, the slope of the distribution of service time probabilities grows larger and larger, eventually becoming positive.

Q: The study of waiting lines calculates the cost of providing good service but does not value the cost of customers' waiting time.

Q: Parker Co. is preparing next period's forecasts. Total fixed costs are expected to be $300,000 and the contribution margin ratio is expected to be 30%. (a) Calculate the company's break-even point in dollar sales. (b) If sales are $1,800,000 above the break-even point, what will Parker's pretax income be?

Q: In the analysis of queuing models, the Poisson distribution often describes arrival rates and service times are often described by the negative exponential distribution.

Q: A firm provides the following sales data: Expected unit sales.. 5,000 Unit variable cost"u00a6.. $10 Unit selling price"u00a6. $16 Total fixed cost"u00a6"u00a6. $12,000 Required: (a) Calculate the break-even point in dollar sales. (b) Calculate the margin of safety in dollar sales.

Q: A bank office with five tellers, each with a separate line of customers, exhibits the characteristics of a multi-phase queuing system.

Q: LIFS (last-in, first-served) is a common queue discipline, most often seen where people, not objects, form the waiting line.

Q: The cost of waiting decreases as the service level increases.

Q: If the service time within a queuing system is constant, the service rate can be easily described by a negative exponential distribution.

Q: The following information is available for Alba Company's maintenance cost over the last four months. Month Maintenance hours Maintenance cost January 150 $6,000 February 120 $5,100 March 240 $8,100 April 210 $6,900 Use the high-low method to estimate both the fixed and variable component of its maintenance cost.

Q: A waiting-line system with one waiting line and three sequential processing stages is a multi-channel single-phase system.

Q: Seaquest Company's contribution margin income statement is presented below. Sales for the current period consisted of 5,000 units. Determine the company's break-even point in dollars. Seaquest Company Contribution Margin Income Statement Sales $125,000 Variable costs 90,000 Contribution margin 35,000 Fixed costs 28,000 Net income $7,000

Q: In queuing problems, the term "renege" refers to the fact that some customers leave the queue before service is completed.

Q: Expanse Co. is considering the production and sale of a new product line with the following sales and cost data: unit sales price $125; unit variable costs $50; and total fixed costs of $150,000. Calculate the break-even point in units and in dollar sales.

Q: A hospital emergency room always follows a first-in, first-served queue discipline in the interest of fairness.

Q: Elk Co. manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Elk can buy a newer production machine that will increase total fixed costs by $22,800 but variable costs will be decreased by $0.40 per unit. What effect would the purchase of the new machine have on Elk's break-even point in units?

Q: Balk and renege are elements of queue discipline.

Q: A transportation model uses at least 10 sources and 100 destinations. If the ratio of sources to destinations remains constant, does the maximum % of cells used by the optimum solution remain constant? Why or why not?

Q: Wolowitz Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

Q: A transportation model uses only 5% of its cells. If the number of destinations is 1000, determine the number of sources in the model.

Q: Craft Company and Jarmer Company each have sales of $200,000 and costs of $140,000. Craft Company's costs consist of $40,000 fixed and $100,000 variable, while Jarmer Company's costs consist of $100,000 fixed and $40,000 variable. Which company will suffer the greatest decline in profits if sales volume declines by 15%?Prepare income statements and compute degree of operating leverage to assess.

Q: Source A has capacity of 15, Source B has capacity of 30, Destination 1 has demand of 5 and Destination 2 has demand of 20. Fill in the following table with the correct initial solution for a Northwest-corner method approach. Destination 1 Destination 2 Dummy Destination Source A 5 10 Source B 10 20

Q: Fielder Productions reports the following information: Total Contribution Margin"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6.. $32,000 Total Fixed Costs"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6. $28,000 Required: (a) Calculate Fielder's degree of operating leverage (DOL). (b) Fielder Productions forecasts a 6% increase in sales. What is the expected effect in percent on pretax income?

Q: Given the following feasible solution determine if the problem is degenerate and then find the optimal solution and its cost. Assume that capacity for source A is 10 and 30 for source B. Destination A demands 10 units while destination B demands 30 units. Cost of shipping per unit is given as AA ($4), AB ($1), BA ($3), and BB ($2). Destination A Destination B Source A 10 Source B 30

Q: Clockworks Co. reports the following data for the current year: Units Sold 1,200 Unit Sales Price $30 Unit Variable Cost $10 Total Fixed Cost"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6"u00a6.. $18,000 Required: (a) Calculate Clockworks' pretax income. (b) Calculate Clockworks' degree of operating leverage.

Q: A transportation model's optimal solution uses no more than 8% of cells and has 100 sources. Find the number of destinations.

Q: A company manufactures and sells searchlights. Each searchlight sells for $345. The variable cost per unit is $198, and the company's total fixed costs are $635,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

Q: A manufacturer of semiconductor "wafers" has been attempting to convert its operations to practices more in keeping with JIT principles. The firm is now paying much more attention to the transit time between one processing stage and the next. The plant has a somewhat haphazard pattern of machine locations, partly because the machines were purchased and installed at different times, partly from a shortage of floor space, and partly from previous experiments with work cells. The bottom line is this: there are four machines that perform a certain processing phase, and three machines that perform the next phase. All units of a large class of wafers go through these two phases. The table below displays the transit time, in minutes, from each machine of the first phase to each machine of the second. Machine 3 is not really 100 minutes away from machine B; the company has prohibited that combination because of quality problems associated with that specific pairing. Supply and demand quantities are in wafers processed per week. Develop a transit time minimizing solution for this firm. What is the total transit time of this solution? Which machines are fully utilized? Which machines have some capacity unused or requirements unfilled? Was the prohibition on the 3-B combination honored?

Q: A firm has established a distribution network for the supply of a raw material critical to its manufacturing. Currently there are two origins for this raw material, which must be shipped to three manufacturing plants. The current network has the following characteristics: The firm has identified two potential sites for a third raw material source; these are identified as Candidate A and Candidate B. From A, the costs to ship would be $9 to Plant 1, $10 to Plant 2, and $12 to Plant 3. From B, these costs would be $11, $14, and $8. The new source, wherever it is located, will have a capacity of 500 units. Solve with the transportation method. Which site should be selected?

Q: A firm has established a distribution network for the supply of a raw material critical to its manufacturing. Currently there are two origins for this raw material, which must be shipped to three manufacturing plants. The current network has the following characteristics: The firm has identified two potential sites for a third raw material source; these are identified as Candidate A and Candidate B. From A, the costs to ship would be $9 to Plant 1, $10 to Plant 2, and $12 to Plant 3. From B, these costs would be $11, $14, and $8. The new source, wherever it is located, will have a capacity of 500 units. Set upbut DO NOT SOLVE this problem as though you were going to solve it with transportation problem software.

Q: Find the minimum cost solution for the transportation problem detailed in the table below. Before your solution can be implemented, you discover that the combination Source 3 Destination 1 is unavailable, due to political turmoil in the country where Source 3 is located. Solve the revised problem. How much is cost increased by this complication?

Q: Ludington Corporation provides the following data from a recent period for its manufacture of shoes: variable manufacturing costs, $24,000; variable selling costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period. Calculate the contribution margin and the contribution margin ratio.

Q: Glover Headgear produces specialty logo baseball caps for a variety of customers. Selected cost data for Glover follows: direct materials cost $8,000; sales commissions, $9,000; depreciation on factory equipment, $21,000; factory labor, $16,000; factory lease, $24,000. If Glover sells 6,100 caps at an average price of $12 for each cap, what is the company's contribution margin?

Q:

Q: Dodge Industries incurs the following costs during the current year: Depreciation of machinery $15,000 Direct labor. 6,000 Direct materials 4,000 Executive salaries 20,000 Insurance 2,000 Rent on building 8,000 Sales commissions 10,000 Vehicle lease cost 5,000 Sales for the year were $80,000 and Dodge Industries determined that only the direct production costs (prime costs) and sales commissions are to be classified as variable costs; all other costs are classified as fixed costs. Dodge sold 400 units. (a) Calculate the unit contribution margin and the contribution margin ratio for Dodge Industries. (b) Dodge Industries is considering plans that would increase the contribution margin ratio for next year. Should it pursue these plans? Explain.

Q:

Q:

Q:

Q: Isaacson Co. has total fixed costs of $240,000 and a contribution margin ratio of 40%. If rent expense increases by $5,000, how much will sales have to increase to cover this increase in costs?

Q: Consider the transportation problem in the data set and optimal solution below. Calculate improvement indices on each empty cell. Is this solution optimal?

Q: Consider the transportation problem in the data set and optimal solution below. Verify by hand or by calculator (show your work) the value of the objective function.

Q: For the transportation problem below, construct an initial feasible solution using the intuitive method.

Q: The following data relate to a product sold by Hallstone Company: Total Variable costs $90,000 Total fixed costs $27,000 Predicted pre-tax income $18,000 Contribution margin per unit $5.00 (a) Calculate the number of units expected to be sold. (b) Calculate the expected total dollar sales.

Q: For the data below, construct an initial feasible solution using the northwest-corner rule.

Q: A transportation problem has 10 origins and 32 destinations. How many possible routes are there for this problem? How many routes will be used in the optimal solution?

Q: Margin Company has total fixed costs of $360,000 and variable costs of $14 per unit. If the unit sales price is reduced from $24 to $20 and advertising is increased by $10,000, sales will increase from 40,000 to 65,000 units. Should Margin reduce its per unit sales price and pay for the additional advertising? (Support your answer with calculations.)

Q: A transportation problem has 6 origins and 12 destinations. How many possible routes are there for this problem? How many routes will be used in the optimal solution?

Q: Crookshank Manufacturing has total fixed costs of $460,000. A unit of product sells for $20 and variable costs per unit are $11. Prepare a contribution margin income statement showing predicted net income (loss) if Crookshank sells 100,000 units for the year ended December 31.

Q: How might the transportation method be used to help a firm add a facility to an existing distribution network? You may wish to describe a simple example.

Q: Portal Manufacturing has total fixed costs of $520,000. A unit of product sells for $15 and variable costs per unit are $11. a) Prepare a contribution margin income statement showing predicted net income (loss) if Portal sells 100,000 units for the year ended December 31. b) At a minimum, how many units must Portal sell in order not to incur a loss?

Q: In formulating a transportation problem, you discover that one of the route combinations is forbidden by contract, or prohibited by law, or ruled out by company policy. How would you indicate the cost of that cell in preparing the problem to be solved?

Q: Zola Co. has a contribution margin ratio of 40% and would like to determine whether an additional advertising expenditure of $4,000 would increase sales by $8,000. Calculate the increase or decrease in net income that would result from this change, and comment on whether Zola should purchase the additional advertising.

Q: The larger a transportation problem (that is, as the problem has more rows and more columns), the smaller the fraction of all possible routes that will be filled in a solved problem. Explain.

Q: Philadelphia Co. is considering the production and sale of a new product with the following sales and cost data: unit sales price, $300; unit variable costs, $180; total fixed costs, $270,000; and projected sales, $900,000. What is the margin of safety: (a) In dollar sales? And (b) As a percent of sales?

Q: When is it necessary to add dummy sources or destinations to a transportation problem?

Q: Journey Company is considering the production and sale of a new product with the following sales and cost data: unit sales price $18; unit variable costs $8.50; and total fixed costs of $81,250. Determine the dollar sales needed to generate an pre-tax income of $44,000, rounded to the nearest whole dollar.

Q: When does degeneracy occur in a transportation model?

Q: Johnston Co. anticipates total fixed costs of $120,000 and variable costs equal to 40% of sales. What is the pretax income if sales are $650,000?

Q: Proctor Company has fixed costs of $315,000 and a contribution margin ratio of 24%. If sales are expected to be $1,500,000, what is the percentage of the margin of safety?

Q: What is the difference between a feasible solution and an optimal solution?

Q: What does the stepping-stone method do?

Q: What purpose does the northwest-corner rule serve?

Q: A company has a goal of earning $128,000 in pre-tax income. The contribution margin ratio is 30%. What dollar amount of sales must be achieved to reach the goal if fixed costs are $64,000?

Q: State, in order, the three steps in making an initial allocation with the northwest-corner rule.

Q: What is transportation modeling?

Q: The number of routes filled by a solution to a transportation problem is no larger than __________.

Q: __________ is an occurrence in transportation problems when too few shipping routes are being used to allow calculation of improvement indices.

Q: A transportation problem that has more units supplied than demanded will require a(n) __________ to balance the problem.