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Capacity Planning (Sample Problems)

The document provides examples of capacity planning problems. The first problem calculates the break-even point (BEP), total cost at BEP, and determines if there would be a profit or loss if 400 units are sold. The BEP is 450 units, total cost at BEP is 67,500 PHP, and selling 400 units would result in a 1,000 PHP loss. The second problem calculates the BEP, profit levels, and volume needed for specific profit and revenue targets for a producer of slippers.

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Eliza Jayne Princess Vizconde
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338 views2 pages

Capacity Planning (Sample Problems)

The document provides examples of capacity planning problems. The first problem calculates the break-even point (BEP), total cost at BEP, and determines if there would be a profit or loss if 400 units are sold. The BEP is 450 units, total cost at BEP is 67,500 PHP, and selling 400 units would result in a 1,000 PHP loss. The second problem calculates the BEP, profit levels, and volume needed for specific profit and revenue targets for a producer of slippers.

Uploaded by

Eliza Jayne Princess Vizconde
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
  • Problem 1
  • Problem 2

YOPMAN - PRODUCTION AND OPERATIONS MANAGEMENT (WITH LABORATORY)

Capacity Planning (Sample Problems)


I. Problem 1
Problem:

Company X manufactures belts for which the material cost is Php 55 per unit. The labor cost is Php 50 a pair and additional
variable cost is Php 25 per unit. The fixed costs amounts to Php Php 9,000. If each pair of slippers sells at Php 150, find:

1) BEP?
2) Total Cost at BEP?
3) Will there be profit or loss if items sold are 400 units?

Answer:

1) BEP? 450 units


2) Total Cost at BEP? Php 67,500
3) Will there be profit or loss if items sold are 400 units? Loss of 1,000

Solution:

Given:
Material Cost P 55 per unit
Labor Cost 130 P 50 a pair
Variable Cost P 25 per unit
Fixed Cost P 9,000
Selling Price P 150 each pair

𝑭𝒊𝒙𝒆𝒅 𝑪𝒐𝒔𝒕
Break-even point (BEPx) =
(𝑺𝒆𝒍𝒍𝒊𝒏𝒈 𝑷𝒓𝒊𝒄𝒆−𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕)
1) BEP?
𝟗,𝟎𝟎𝟎
= 𝟒𝟓𝟎
(𝟏𝟓𝟎−𝟏𝟑𝟎)

Total Cost = 𝑭𝒊𝒙𝒆𝒅 𝑪𝒐𝒔𝒕 + (𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕 𝒙 𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑼𝒏𝒊𝒕𝒔)


2) Total Cost at BEP?
𝟗, 𝟎𝟎𝟎 + (𝟏𝟑𝟎 𝒙 𝟒𝟓𝟎) = 𝟔𝟕, 𝟓𝟎𝟎

Profit = (𝑺𝒆𝒍𝒍𝒊𝒏𝒈 𝑷𝒓𝒊𝒄𝒆 𝒙 𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑼𝒏𝒊𝒕𝒔) − 𝑭𝒊𝒙𝒆𝒅 𝑪𝒐𝒔𝒕 − (𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕 𝒙 𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑼𝒏𝒊𝒕𝒔)
3) Will there be profit or loss if
(𝟏𝟓𝟎 𝒙 𝟒𝟎𝟎) − 𝟗, 𝟎𝟎𝟎 − (𝟏𝟑𝟎 𝒙 𝟒𝟎𝟎)
items sold are 400 units?
(𝟔𝟎, 𝟎𝟎𝟎) − 𝟗, 𝟎𝟎𝟎 − (𝟓𝟐, 𝟎𝟎𝟎) = −𝟏, 𝟎𝟎𝟎 → Loss

P a g e 1|2
Jay]
YOPMAN - PRODUCTION AND OPERATIONS MANAGEMENT (WITH LABORATORY)
Capacity Planning (Sample Problems)
II. Sample Problem 2
Problem:

A producer of slippers is looking into putting up a new plant to absorb the backlog of demand that now exists. The primary location
being considered will have a fixed cost of $9,300 per month and variable cost of $ 0.70 cents per unit produced. Each item is sold to
retailers at a price that averages $ 0.90 cents.

1) What volume per month is required to break even?


2) What profit would be realized on a monthly volume of
61,000 units? 87,000 units?
3) What volume is needed to obtain a profit of $16,000 per
month?
4) What volume is needed to provide a revenue of $23,000 per
month

Answer:

1) What volume per month is required to break even? 46,500 units


2) What profit would be realized on a monthly volume of $2,900;
61,000 units? 87,000 units? $8,100
3) What volume is needed to obtain a profit of $16,000 per
126,500
month?
4) What volume is needed to provide a revenue of $23,000 per
25,555.56
month

Solution:

P a g e 2|2
Jay]

YOPMAN - PRODUCTION AND OPERATIONS MANAGEMENT (WITH LABORATORY) Capacity Planning (Sample Problems) P a g e 1 | 2 Jay] I
YOPMAN - PRODUCTION AND OPERATIONS MANAGEMENT (WITH LABORATORY) Capacity Planning (Sample Problems) P a g e 2 | 2 Jay] I

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