ADM 3301 - Assignment 1 - Mandatory PDF

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Rahul Sarma

300014187

Question 1. GM (10 marks) In December, GM produced 6600 customized vans at its plant in Windsor. The labour productivity at this plant is known to have been 0.10 vans per labour-hour during that month; 300 labourers were employed at the plant that month. a) How many hours did the average labourer work that month? Labour hours required = 6600/0.1 = 66000 Average hours per labor = Labour hours required/# of laborers = 66000/300 = 220 hours Therefore, the average laborer worked 220 hours that month. b) If productivity can be increased to 0.11 vans per hour, how many hours would the average labourer work that month? Labour hours required = 6600/0.11 = 60000 Average hours per labor = 60000/300 = 200 Therefore, the average laborer would work 200 hours that month. Question 2. LaVilla (10 marks) LaVilla is a village in the Alps. Given its enormous popularity among Swiss, German, Austrian, and Italian skiers, all of its beds are always booked in the winter season and there are, on average, 1,200 skiers in the village. On average, skiers stay in LaVilla for 10 days. a) How many new skiers are arriving—on average—in LaVilla every day? L = average # of skiers, W = average time skier spends L = 1200, W = 10 days Thus, Arrival rate = 1200/10 = 120 skiers/day b) A study done by the largest hotel in the village has shown that skiers spend on average $50 per person on the first day and $30 per person on each additional day in local restaurants. The study also forecasts that—due to increased hotel prices—the average length of stay for the 2020/2021 season will be reduced to five days. What will be the percentage change in revenues of local restaurants compared to last year (when skiers still stayed for 10 days)? Assume that hotels continue to be fully booked! Revenue when skiers stayed for 10 days: Spent by 1 skier in 10 days = 50 + 30*9 = $320 Spent by 1 skier/day = 320/10 = $32

Rahul Sarma

300014187

Revenue when skiers stayed for 5 days: Spent by 1 skier in 5 days = 50 + 30*4 = $170 Spent by 1 skier/day = 170/4 = $34 Thus, Revenue % difference = (34-32)/32*100 = 6.25% Therefore, Revenue will increase by 6.25% Question 3. Kroger Company (10 marks) The Kroger Company is an American retail company. The following provides 2012 financial information for Kroger (in Million $s): Inventory $6,244, Revenue $95,751, Cost of goods sold $76,858 In 2012 what were Kroger’s inventory turns? Inventory turns = COGS/Inventory = 76858/6244 = 12.3 turns/year Question 4. BCH (10 marks) BCH is, a large consulting firm in the United Kingdom, has a consulting staff consisting of 400 consultants at the rank of “associate”. On average, a consultant remains at the associate level for 2 years. After this time 30% of the associates are promoted to the rank of “engagement manager”, and the other 70% have to leave the company. In order to maintain the consulting staff at an average level of 400 associates, how many new consultants does BCH have to hire each at associate level? 30% of 400 consultants = 120 associates are promoted to managers after 2 years Remaining 400 - 120 = 280 associates leave the company after 2 years Inventory = Flow rate*Flow time Thus, 400 consultants = Flow rate*2 years Therefore flow rate = 200 consultants per year Mckinley will have to hire 200 consultants each year at the associate level.

Rahul Sarma

300014187

Question 5. Utilization and efficiency (15 marks) a) A college program has the facilities and faculty to handle an enrolment of 2000 new students per semester. However, to limit class sizes to a “reasonable” level (under 200, generally), the college’s registrar placed a ceiling on enrolment of 1500 new students. Although there was ample demand for business courses last semester, conflicting schedules allowed only 1450 new students to take business courses. What is the utilization of this system? Design capacity of school

2000

Effective capacity

1500

Actual student enrolled

1450

Utilization = Actual enroll/Design capacity

=1450/2000

72.50%

b) A hospital emergency room has been designed for 110 emergency patients per day. However, in an effort to space optimization, the hospital’s manager placed a ceiling on admission of 90 patients per day. On a rainy day, only 65 emergency patients received care and treatment. What is the efficiency of this hospital on this rainy day? Design capacity of school

110

Effective capacity

90

Actual student enrolled

65

Utilization = Actual enroll/Design capacity

=65/90

72.22%

Rahul Sarma

300014187

Question 6. Bagel Store (20 marks) Consider a bagel store selling three types of bagels that are produced according to the process flow diagram outlined below. We assume the demand is 180 bagels a day, of which there are 30 grilled veggies, 110 veggies only, and 40 cream cheese. Assume that the workday is 10 hours long and each resource is staffed with one worker. a) Where in the process is the bottleneck? Activity time for each activity and the number of workers processing:

Capacity of the activity:

Rahul Sarma

300014187

Required Capacity:

The bottleneck is at the veggies on bagel as it has the highest implied utilization. b) How many units can the process produce within one hour, assuming the product mix has to remain constant? = (3 + 11 + 4) x 12/14 = 18 x 0.85 = 15.3/hour or 153/day Therefore, 153 bagels can be produced within a day. Question 7. Red Roses (15 marks) As a prospective owner of a club known as the Red Rose, you are interested in determining the volume of sales dollars necessary for the coming year to reach the break-even point. You have decided to break down the sales for the club into four categories, the first category being beer. Your estimate of the beer sales is that 36,000 drinks will be served. The selling price for each unit will average $2.00; the cost is $1.00. The second major category is meals, which you expect to be 12,000 units with an average price of $10.00 and a cost of $6.00. The third major category is desserts and wine, of which you also expect to sell 10,000 units, but with an average price of $2.25 per unit sold and a cost of $1.25 per unit. The final category is lunches and inexpensive sandwiches, which you expect to total 22,500 units at an average price of $6.00 with a food cost of $3.25. Your fixed cost (i.e., rent, utilities, and so on) is $1,600 per month plus $2,000 per month for entertainment.

Rahul Sarma

300014187

a) What is your break-even point in dollars per month?

Total fixed cost = 1600 + 2000 = 3600 BEP in dollars = Fixed Cost/Weighted Contribution Margin = 3600/0.4460 = 8071.75 b) What is the expected number of meals each day if you are open 30 days a month? Expected BEP for Meals in a month = (8071.75*0.3433)/10 = 277.10 meals Expected BEP for Meals each day = 277.10/30 = 9.25 meals each day (approx.) Question 8. NPV (10 Marks) A new machine tool is expected to generate receipts as follows: $5,000 in year one; $3,000 in year two, nothing in the next year, and $2,000 in the fourth year. At an interest rate of 6%, a) what is the present value of these receipts? Given the Interest rate = 6% Discount rate = 1 + Interest rate/100 = 1.06 Present value of the receipts = Receipt in year1/Discount rate + Receipt in year 2/( Discount rate)^2 + Receipt in year 3/ (discount rate)^3 + Receipt in year 4/(Discount rate)^4 = 5000/1.06 + 3000/(1.06)^2 + 0 + 2000/(1.06)^4 = 4716.98 + 2669.99 + 0 + 1584.18 = $8971.15 b) Is this a better present value than $2,500 each year over four years? Present value of the receipts = Receipt in year1/Discount rate + Receipt in year 2/(Discount rate)^2 + Receipt in year 3/ (discount rate)^3 + Receipt in year 4/( Discount rate)^4 = 2500/1.06 + 2500/(1.06)^2 + 2500/(1.06)^3 + 2500/(1.06)^4 = 2358.49 + 2224.99 + 2099.04 + 1980.23 = $8662.75 The PV of $8971.15 is higher than the PV of receipts worth $8662.75. Therefore, the first case is a better situation.

Rahul Sarma

300014187...