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Aggregate planning and forecasting
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Practice Problems: Chapter 7, Process Strategy
Problem 1:
Jackson Custom Machine Shop has a contract for 130,000 units of a new product. Sam Jumper, the owner, has calculated the cost for three process alternatives. Fixed costs will be: for general-purpose equipment (GPE), $150,000; flexible manufacturing (FMS), $350,000; and dedicated automation (DA), $950,000. Variable costs will be: GPE, $10; FMS, $8; and DA, $6. Which should he choose?
Problem 2:
Solve Problem 1 graphically
Problem 3:
Using either your analytical solution found in Problem 1, or the graphical solution found in Problem 2, identify the volume ranges where each process should be used.
Problem 4:
If Jackson Custom Machine is able to convince the customer to renew the contract for another one or two years, what implications does this have for his decision?
ANSWERS:
Problem 1:
Solve for the crossover between GPE and FMS:
or
Solve for the crossover between FMS and DA:
or
Therefore, at a volume of 130,000 units, FMS is the appropriate strategy.
Problem 2 & 3:
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