1. Chapter 6: Capacity and Location Planning 1 Solutions to Chapter 6 Exercises

2. Chapter 6: Capacity and Location Planning 2 Exercise 1 a. 60/6 = 10 tests/hour b. 45/10 = 4.5 hours c.

3. Chapter 6: Capacity and Location Planning 3 Exercise 1 continued d. 60/3 = 20 tests/hour 45/20 = 2.25 hours e. The fifth professor would reduce the work but not the total time since two sections are both taking 3 minutes to grade.

4. Chapter 6: Capacity and Location Planning 4 Exercise 2a Natural operating points are 5, 7, and 9 machines.

5. Chapter 6: Capacity and Location Planning 5 Exercise 2b - Lines 1 and 2 (Identical Data) * 12 minutes of total work in both lines divided by three machines = 4 minutes ** 13 minutes of output divided by 3.5 machines times 4 minutes of cycle time = 93%.

6. Chapter 6: Capacity and Location Planning 6 Exercise 2b concluded Sharing machines between lines increases flexibility and efficiency considerably when there are a small number of processing machines. If the lines are initially identical, it is best to equally share the machine’s time.

7. Chapter 6: Capacity and Location Planning 7 Exercise 3

8. Chapter 6: Capacity and Location Planning 8 Exercise 4 First determine learning rate From table in text this corresponds to a 60% learning rate. This sixth unit will require approximately 0.267(5) = 1.602 labor hours. From the table in the text, the first five units will require 2.71(6) = 16.26 labor hours.

9. Chapter 6: Capacity and Location Planning 9 Exercise 5 Use the cumulative table: Read across the 25th row of table to a rate of 85%.

10. Chapter 6: Capacity and Location Planning 10 Exercise 6 Unit 1: 200 hours First 50: (63.1 hrs./unit)50 units = 3155 hrs. In cumulative table at 50 units locate 15.78 at 75% rate.

11. Chapter 6: Capacity and Location Planning 11 Exercise 6 continued At 100 units: 24.18(200) = 4836 total hours Less the time for the first 50: 4836 - 3155 = 1681 hours for second fifty Average labor content of second contract: 1681 / 50 = 33.62 hours per unit Average labor content, both combined: 4836/100 = 48.36 hours per unit

12. Chapter 6: Capacity and Location Planning 12 Exercise 6 concluded At a labor rate of $10/hour, the first fifty cost $631 each, so they lose money. The second fifty cost $336.20 each and thus make money. Between both contracts, they cost $483.60 each, on average, so the net result was a profit for the firm of $550 - 484 = $66 each for a total of $6600. One implication is to bid under cost to get a contract and then make a profit on follow-on contracts.

13. Chapter 6: Capacity and Location Planning 13 Exercise 7 Report 1 required 9.5 hours Report 3 required 4.8 hours 4.8 / 9.5 =.505 The learning rate from table is 65% Report 4 will take:.4225(9.5) = 4.01 Report 5 will take.3678(9.5) = 3.49 Time to compete 4 and 5: 7.5 hours Therefore, will not be completed on time.

14. Chapter 6: Capacity and Location Planning 14 Exercise 8 Site I: Sum = 871 total feet Site II: Sum= 835 total feet Site III: Sum = 956 total feet Site II is Best

15. Chapter 6: Capacity and Location Planning 15 Exercise 9 Site I is best.

16. Chapter 6: Capacity and Location Planning 16 Exercise 10 Variable Cost per Unit –Location 1: $3.51 –Location 2: 3.05 –Location 3: 2.59 Next decade’s sales: 48,000 to 96,000 units/year

17. Chapter 6: Capacity and Location Planning 17 Exercise 10 continued Even with an increase in labor costs, production volume (and the related savings of locations 2 and 3) is not sufficient to offset the lower annual fixed cost of location 1.

18. Chapter 6: Capacity and Location Planning 18 Exercise 11 - Factor Weight Computation Clientele = 1 Rent =.9  1 =.9 Indoor Mall =.95 .9 =.855 Volume =.8 .9 =.72

19. Chapter 6: Capacity and Location Planning 19 Exercise 11 - Location 1 Clientele: 1  2 = 2 Rent:.9  3 = 2.7 Indoor Mall:.855  3 = 2.565 Volume:.72  3 = 2.16 Total Factor Weighted Score = 9.425

20. Chapter 6: Capacity and Location Planning 20 Exercise 11 - Location 2 Clientele: 1  3 = 3 Rent:.9  2 = 1.8 Indoor Mall:.855  1 =.855 Volume:.72  2 = 1.44 Total Factor Weighted Score = 7.095

21. Chapter 6: Capacity and Location Planning 21 Exercise 11 - Location 3 Clientele: 1  1 = 1 Rent:.9  1 =.9 Indoor Mall:.855  3 = 2.565 Volume:.72  3 = 2.16 Total Factor Weighted Score = 6.625

22. Chapter 6: Capacity and Location Planning 22 Exercise 11 - Location 4 Clientele: 1  3 = 3 Rent:.9  3 = 2.7 Indoor Mall:.855  1 =.855 Volume:.72  1 =.72 Total Factor Weighted Score = 7.275 Nina should select location 1.