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Topic:
Capacity Planning For Products and Services: Management Coursework
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Capacity Planning For Products and Services
Name MGMT 339Instructor Date
11. Assume that only the purchasing costs are being considered. Which machine would have the lowest total cost, and how many of that machine would be needed? Machines operate 10 hours a day, 250 days a year.
10 hours a day= 600 minutes (10*60)
In 250 days = 150,000 minutes (600min*250 days)
Total processing time
Product
Annual Demand
Processing time per unit (minutes)
A
B
C
1
16,000
16,000*3=48,000
16,000*4=64,000
16,000*2=32,000
2
12,000
12,000*4=48,000
12,000*4=48,000
12,000*3=36,000
3
6,000
6,000*5=30,000
6,000*6=36,000
6,000*4=24,000
4
30,000
30,000*2=60,000
30,000*2=60,000
30,000*2=30,000
Processing time
186,000
208,000
122,000
NA=186,000/150, 000 =1.24 ≈ 2 machines
NB=208,000/150, 000=1.39 ≈2 machines
NC= 122,000/150, 000=0.81 ≈ 1 machine
Machine
Cost
No. of machine (s)
Cost of Machine
A
$40,000
2
$40,000 *2=$80,000
B
$30,000
2
$30,000 *2=$60,000
C
$80,000
1
$80,000 *1=$80,000
Thus, buy 2 “B” machines at a cost of $ 60,000, rather than but 2 Machine ‘A” at $ 80,000 or one machine “C” at $ 80,000.
b. Consider this additional information: The machines differ in terms of hourly operating cost...
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