1. Asmizon Productions forecasts the following demand for a product (in thousand
ID: 445104 • Letter: 1
Question
1. Asmizon Productions forecasts the following demand for a product (in thousands of units) over the next five years.
Year
1
2
3
4
5
Forecast demand
55
53
58
61
59
The operations manager currently has eleven machines that run on a two shifts (6 hours each) basis. Fifteen days each year are available for scheduled maintenance of all the equipment. During the scheduled maintenance time, there is no process output. The production facility assumes that there are 255 workdays in a year. Each completed good takes 45 minutes to produce.
* At what capacity levels (percentage of normal capacity) would the production company be operating over the next five years based upon the above forecasted demand? (Hint: compute the ratio of demand to capacity each year)
* Does the firm need to buy more machines? If so, how many? When? If not, justify.
Year
1
2
3
4
5
Forecast demand
55
53
58
61
59
Explanation / Answer
Since Firm is straining the system by running it beyond the installed capacity, It should buy more machines.
It should 4 machines in Year 1 and 1 more machine in Year 3 begning.
Working shown below.
At Year 3
A Number of Machines 11 B Number of Shifts 2 C Number of hours per shift 6 D = A*B*C Total Hours per day 132 E Total Work days per year 255 F Maintenance Days 15 G = E-F Total Production days 240 H = D*G Total Production Hours 31,680 I Time per completed unit (Hours) 0.75 Total Installed Capacity (Units) 42,240 Years Forecast Demand Capacity Capacity Levels to operate 1 55,000 42,240 130% 2 53,000 42,240 125% 3 58,000 42,240 137% 4 61,000 42,240 144% 5 59,000 42,240 140%Related Questions
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