32) Norton's Convenience store has a variable demand. The daily demand ranges from 270 to 330
customers a day who average purchasing 5 items each. The average daily demand is 300 customers. The convenience store currently operates 12 hours a day. Each order takes approximately 2 minutes.
Required:
a. What is the average customer waiting time, in minutes?
b. What is the cycle time for an order?
c. Norton has decided that the waiting time is too long and has increased the hours the store is open to 15 hours. What is the waiting time now? Answer:
a. Waiting minutes = [300 × (2) 2]/{2 × [720 minutes per day - (300 × 2)]} = 5 minutes
b. Cycle time = waiting time + processing time = 5 + 2 = 7 minutes
c. Waiting minutes = [300 × (2) 2] / {2 × [900 minutes per day - 300 × 2)]} = 2 minutes
Diff: 3
Objective: 5
AACSB: Application of knowledge
33) Brown Laundry has a variable demand. The daily demand ranges from 100 to 140 customers a day with an average of 5 items. The average daily demand is 110 customers. The laundry operates 10 hours a day. Each order takes approximately 5 minutes.
Required:
a. What is the average customer waiting time, in minutes?
b. What is the cycle time for an order?
c. The manager has decided that the waiting time is too long and has increased the workday to 11 hours. What is the waiting time now? Will the customers be any happier? Answer:
a. Waiting minutes = [110 × (5) 2]/{2 × [600 minutes per day - (110 × 5)]} = 27.5 minutes
b. Cycle time = waiting time + processing time = 27.5 + 5 = 32.5 minutes
c. Waiting minutes = [110 × (5) 2] / {2 × [660 minutes per day - (110 × 5)]} = 12.5 minutes
The customers are probably not much happier unless they change the time when they stop by the laundry. If the customers now fill the 11-hour day, the new reduced waiting time will be a definite improvement.
Diff: 2
Objective: 5
AACSB: Application of knowledge
36
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34) Acme Janitor Service has always taken pride in the fact that it had one of the highest customer
response times in the home cleaning service industry. However, as the products manufactured for this industry have become more complex, the company's customer response time has declined.
Required:
Why do you think that response time declined if all other quality factors have remained the same? Answer: If quality production was one of the other control factors, and the products became more
complex, it probably takes more time to inspect and verify the quality of the finished products. Therefore, to maintain the same level of quality, additional time had to be put into the product cycle.
Diff: 2
Objective: 5
AACSB: Application of knowledge
Objective 19.6
1) Which of the following reduces manufacturing cycle times and delays? A) increasing the capacity of a bottleneck resource
B) selling of an existing equipment to save up on depreciation costs C) increasing the time it takes for setups and processing D) outsourcing the job to a third party Answer: A
Diff: 2
Objective: 6
AACSB: Application of knowledge
2) Inventory carrying costs equal the ________.
A) opportunity costs of the investment tied up in inventory and the cost of manufacturing of goods B) costs of storage only
C) opportunity costs of the investment tied up in inventory and the relevant costs of storage D) historical costs and the relevant costs of storage Answer: C
Diff: 2
Objective: 6
AACSB: Analytical thinking
3) Which of the following is a storage cost? A) labor cost B) deterioration C) direct material D) overhead cost Answer: B
Diff: 2
Objective: 6
AACSB: Application of knowledge
37
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4) When manufacturing cycle increases, ________. A) sunk costs will decrease
B) opportunity costs will increase C) opportunity costs will decrease
D) inventory carrying costs will increase Answer: D
Diff: 2
Objective: 6
AACSB: Application of knowledge
5) Longer manufacturing cycle times results in ________. A) lower revenues and higher inventory carrying costs B) higher opportunity costs and low profit margins C) lower opportunity costs and high profit margins D) higher revenues and lower inventory carrying costs Answer: A
Diff: 2
Objective: 6
AACSB: Application of knowledge
Answer the following questions using the information below:
Speedy Dress Manufacturing has two workstations, cutting and finishing. The cutting station is limited by the speed of operating the cutting machine. Finishing is limited by the speed of the workers. Finishing normally waits for work from cutting. Each department works an eight-hour day. If cutting begins work two hours earlier than finishing each day, the two departments generally finish their work at about the same time. Not only does this eliminate the bottleneck, but also it increases finished units produced each day by 160 units. All units produced can be sold even though the change increases inventory stock by 20% from 400 units. The cost of operating the cutting department two more hours each day is $1,600. The contribution margin of the finished products is $6 each. Inventory carrying costs are $0.40 per unit per day.
6) What is the total production per day if the change is made? A) 6400 units B) 800 units C) 880 units D) 1600 units Answer: B
Explanation: B) Units per hour = 160/2 = 80 units per day Total production = 80 × 10 = 800 units
Diff: 1
Objective: 6
AACSB: Application of knowledge
38
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7) What is the change in the daily contribution margin if the change is made? A) $(608) B) $(634) C) $(672) D) $800 Answer: C
Explanation: C) Units per hour = 160/2 = 80 units per day Total production =80 × 10 = 800 units
Total contribution margin (160 × $6) $ 960 Carrying cost (80 units × $0.40) (32) Increased costs (1,600) Net change in contribution margin $ (672) Diff: 3
Objective: 6
AACSB: Application of knowledge
Answer the following questions using the information below:
Captain Carl's Seascapes produces sea pictures for sale through catalogs. The company has two
workstations, photo production and framing. The photo production station is limited by the speed of operating the photo development machine. Framing is limited by the speed of the employees. Framing normally waits for work from photo production. Each department works an eight-hour day. If Captain Carl's Seascapes adds an earlier half shift so that photo production begins work four hours earlier than framing each day, the two departments generally finish their work at about the same time. Not only does this eliminate the bottleneck, but it also increases finished units produced each day by 200 units. All units produced can be sold. The cost of operating the photo production department four more hours each day is $1,250. The contribution margin of the finished products is $10 each.
8) What is the total production per day if the change is made? A) 50 units B) 200 units C) 400 units D) 600 units Answer: D
Explanation: D) Units per hour = 200/4= 50 units per hour Total production = 50 × 12 = 600 units per day
Diff: 1
Objective: 6
AACSB: Application of knowledge
39
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9) What is the change in the daily contribution margin if the change is made? A) $250 B) $750 C) $2,000 D) $800
Answer: B
Diff: 3
Objective: 6
AACSB: Application of knowledge
10) The manufacturing cycle including related delays can be reduced by ________. A) batching similar jobs together for processing B) decreasing the capacity of a bottleneck resource C) not setting up flexible manufacturing systems D) increasing the time for setups and processing Answer: A
Diff: 2
Objective: 6
AACSB: Analytical thinking
11) Manufacturing cycle times affect both revenues and costs. Answer: TRUE
Diff: 1
Objective: 6
AACSB: Analytical thinking
12) Longer manufacturing cycle times increase the inventory carrying costs and decrease revenues. Answer: TRUE
Diff: 2
Objective: 6
AACSB: Application of knowledge
13) Increasing the capacity of a bottleneck resource increases manufacturing cycle times and delays. Answer: FALSE
Explanation: Increasing the capacity of a bottleneck resource reduces manufacturing cycle times and delays.
Diff: 2
Objective: 6
AACSB: Application of knowledge
14) One way to increase capacity is to reduce the time it takes for setups and processing. Answer: TRUE
Diff: 1
Objective: 6
AACSB: Analytical thinking
40
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