MGMT 330 Test 2 Review Problems Spring 2018 Instructions: This assignment will b
ID: 352998 • Letter: M
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MGMT 330 Test 2 Review Problems Spring 2018 Instructions: This assignment will be checked at the begineung will be counted as an AH grade. Late arrivals will not be counmed of the class period for completeness aned g whether to introduce a new line ot doggic outfits that consist of a dress, fimcy shoes and a hat (her marketing manager, Izabella insists these the variable costs of each outfit at $6.00 and the fixed costs She plans to sell the outfits at $18 per outfit. a. What is the breakeven point? will be successful). Calista estimates b. Explain what Calista should do if she feels she can sell 580 per year? Explain your answ er. enta manufacturing process that reduces the amount of paritculates ao processes have been identified that provide the same level of 2. Spartan Castings mast implement emitted into the atmosphere. Two process t been particulate redaction. The first process is expected to incur $350,000 of fixed costs per yeat 550 of variable costs to east casting Spartan produces. $150,000 per year and adds $90 of variable cost per casting. a. What is the point of indifference? b. If the expected pumber of castings is 4000, which process should be purchased? Explain your 3. The manager of a grocery store is interested in providing good service to the customers who shop i her store. Currently, the store is operating two checkout counters. On average, 60 customers per hour arrive at the checkout counter, according to a Poisson distribution. Each checkout counter can serve an average of 35 customers per hour with exponential service times. a. what is the probability that no customers are in the systcm? b. What is the probaility that a cussomer will have to wait for service? c. How many customers are expected in the system? d. How many customers are expected in the waiting line? e. How long do customers spend in the system (give your answer in minutes)? t How long do customers spend in the waiting line (give your answer in misutes)? 4. Again Interice Design provides home and office decorating assistance to its custorners. In normal operation, an average of 2 5 customers arrive each hour. One design consultant is available to answer customer questions and make product recommendations. The consultant averages 10 minutes with each customer a. How many customers are in the system on average? b. What is the probability that a customer will have to wait for service? many customers are expected in the system? c. How d. How many customers are expected in the waiting line? e. How long do customers spend in the system (give your answer in minutes)? f. How long do customers spend in the waiting line (give your answer in minutes)?Explanation / Answer
1. Variable cost $6.00
Fixed cost $6000
Selling cost $18
Let’s say the breakeven point is X units. Then we know that at break-even point her revenue will be equal to her cost. Hence we need to equate total revenue to total cost
Total Revenue = Total Cost
18X = 6000 + 6X
12X = 6000
X = 500
a) The breakeven point is 500 units
b) If Calista can sell 580 units per year, she will be making profit. Above 500 units, she will be making profit. Hence she should continue with the project.
2. Process 1 fixed cost $350,000, variable cost $50
Process 2 fixed cost $150,000, variable cost $90
At the point of indifference both the cost will be equal. Hence
Cost of Process 1 = Cost of Process 2
350000 + 50X = 150000 + 90X
200000 = 40X
5000 = X
a) The point of indifference is 5000 casting
b) In case of 4000 casting, the Process 2 must be selected as the total cost for Process 2 is 510,000 vs 550,000 for Process 1.
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