Professional Documents
Culture Documents
Operations Management: Supplement 7 - Capacity Planning
Operations Management: Supplement 7 - Capacity Planning
Management
Supplement 7 –
Capacity Planning
Modified By:
Prof. X
© 2006
© 2006 Prentice
Prentice Hall, Inc. Hall, Inc. S7 – 1
Outline
Capacity
Design and Effective Capacity
Capacity and Strategy
Capacity Considerations
Managing Demand
Capacity Planning
Breakeven Analysis
Single-Product Case
Multiproduct Case
Applying Decision Trees to
Capacity Decisions
Capacity
Design capacity
Effective capacity
Utilization
Schedule jobs
Short-range
planning
* Schedule personnel
Allocate machinery
25 - Room 75 - Room
Roadside Motel 50 - Room Roadside Motel
Roadside Motel
Economies Diseconomies
of scale of scale
25 50 75
Number of Rooms
Figure S7.2
© 2006 Prentice Hall, Inc. S7 – 21
Capacity Considerations
800 –
Break-even point Total cost line
700 – Total cost = Total revenue
Cost in dollars
600 –
500 –
300 –
200 –
Break-even point
occurs when
TR = TC F
or BEPx =
P-V
Px = F + Vx
BEP$ = BEPx P
= F P Profit = TR - TC
P-V = Px - (F + Vx)
= F
= Px - F - Vx
(P - V)/P
F = (P - V)x - F
=
1 - V/P
© 2006 Prentice Hall, Inc. S7 – 29
Break-Even Example
Fixed costs = $10,000 Material = $.75/unit
Direct labor = $1.50/unit Selling price = $4.00 per unit
F $10,000
BEP$ = =
1 - (V/P) 1 - [(1.50 + .75)/(4.00)]
F $10,000
BEP$ = =
1 - (V/P) 1 - [(1.50 + .75)/(4.00)]
$10,000
= = $22,857.14
.4375
F $10,000
BEPx = = = 5,714
P-V 4.00 - (1.50 + .75)
Revenue
40,000 –
Break-even
point Total
30,000 –
Dollars
costs
20,000 –
Fixed costs
10,000 –
–
| | | | | |
0 2,000 4,000 6,000 8,000 10,000
Units
∑ 1 - P x (W )
V i
i
i
$0
© 2006 Prentice Hall, Inc. S7 – 37
Strategy-Driven Investment