Question

1. (T/F) In a break-even analysis problem, if the unit variable cost is decreased, the break-even...

1. (T/F) In a break-even analysis problem, if the unit variable cost is decreased, the break-even point decreases.

2. (T/F) The choice of which process structure to select is based on two main characteristics: volume and degree of customization.

3. Which of the following basic types of process structures is one which equipment, personnel, and work processes that perform the same function are grouped together?

a.Project

b.Assembly line

c.Continuous process

d.There is no such layout

e.Workcenter

4. You are hired as a consultant to decide if your client should purchase a new, highly specialized, piece of equipment. The product to be produced by this equipment is forecast to have a total worldwide demand of 16,000 units over the entire product life. The initial investment to acquire and install the equipment is $256,000. The variable cost to produce each unit will be $15 and the selling price for the finished product will be $30. Which of the following best describes the situation the firm is facing?

a.The company will recover its initial investment

b.The company should invest

c.The company will not recover its investment

d.The break-even is lower than the 16,000 units

e.It's a good investment

Business   Operations-Management   
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Homework Answers

Answer #1

Q1) Answer is True

Break Even Point = Fixed Cost per unit/(Selling Price - Variable Cost per unit)

Hence if VC/unit decreases, the denominator(Contribution Margin) increases and hence BEP decreases.

Q2) Answer is True

Quantity/Volume and level of customization defines the process structure or type in a manufacturing organization.

Q3) Answer is - e.Workcenter

Workn Center layout is considered as a mini-plant where a smaller set of machines, personnel and process are grouped together.

Q4) Answer is - c.The company will not recover its investment

Investment/Fixed cost (FC) = 256000 $

Variable cost (VC) = 15 $/unit

Selling Price (SP) = 30 $/unit

Total demand = 16000 units

Total costs = 256000+(16000*15) = 496000 $

Total Revenue = 16000*30 = 480000 $

As life time costs > life time revenues, the firm will not recover its investment.

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