MGSC 395 EXAM 1 VERIFIED STUDY GUIDE
Break Even Analysis - Answers - Analysis to compare processes by finding the volume
at which two different processes have equal total costs.
pQ = F + cQ
Break Even Quantity - Answers - The volume at which total revenues equal total costs.
Variables for Break Even - Answers - Variable cost (c)
The portion of the total cost that varies directly with volume of output.
Fixed cost (F)
The portion of the total cost that remains constant regardless of changes in levels of
output.
Quantity (Q)
The number of customers served or units produced per year.
Total cost equation - Answers - Total cost = F + cQ
Total Revenue Equation - Answers - Total revenue = pQ
Quantity Equation - Answers - Q= F/(p-c)
A hospital is considering a new procedure to be offered at $200 per patient. The fixed
cost per year would be $100,000 with total variable costs of $100 per patient. What is
the break-even quantity for this service? Use both algebraic and graphic approaches to
get the answer. - Answers - 1000 patients
variables for buy/make options - Answers - F sub b
The fixed cost (per year) of the buy option
F sub m
The fixed cost of the make option
c sub b
The variable cost (per unit) of the buy option
c sub m
The variable cost of the make option
total costs to make/buy - Answers - -Total cost to buy
Fb + cbQ
-Total cost to make
Fm + cmQ
Q= (Fm-Fb)/(cb-cm)
A fast-food restaurant featuring hamburgers is adding salads to the menu
, The price to the customer will be the same
Fixed costs are estimated at $12,000 and variable costs totaling $1.50 per salad
Preassembled salads could be purchased from a local supplier at $2.00 per salad
Preassembled salads would require additional refrigeration with an annual fixed cost of
$2,400
Expected demand is 25,000 salads per year
What is the break-even quantity? - Answers - (12000-2400)/(2-1.50)=19200 salads
Operations Management - Answers - The systematic design, direction, and control of
processes that transform inputs into services and products for internal, as well as
external, customers
supply chain management - Answers - The synchronization of a firm's processes with
those of its suppliers and customers to match the flow of materials, services, and
information with customer demand
Supply chain - Answers - An interrelated series of processes within and across firms the
produces a service or product to the satisfaction of customers
manufacturing process vs. service process - Answers - manufacturing:
Physical, durable output, Output can be inventoried, Low customer contact, Long
response time, Capital intensive, Quality easily measured
service:
Intangible, perishable output, Output cannot be inventoried, High customer contact,
short response time, Labor intensive, Quality not easily measured
Supply Chain View - Answers - Each activity in a process should add value to the
preceding activities; waste and unnecessary cost should be eliminated
Supplier relationship process - Answers - - A process that selects the suppliers of
services, materials, and information and facilitates the timely and efficient flow of these
items into the firm
New service/product development - - Answers - A process that designs and develops
new services or products from inputs from external customer specifications or from the
market
Order fulfillment process - - Answers - A process that includes the activities required to
produce and deliver the service or product to the external customer
Customer relationship process - - Answers - A process that identifies, attracts and
builds relationships with external customers and facilitates the placement of orders by
customers
(customer relationship management)
Break Even Analysis - Answers - Analysis to compare processes by finding the volume
at which two different processes have equal total costs.
pQ = F + cQ
Break Even Quantity - Answers - The volume at which total revenues equal total costs.
Variables for Break Even - Answers - Variable cost (c)
The portion of the total cost that varies directly with volume of output.
Fixed cost (F)
The portion of the total cost that remains constant regardless of changes in levels of
output.
Quantity (Q)
The number of customers served or units produced per year.
Total cost equation - Answers - Total cost = F + cQ
Total Revenue Equation - Answers - Total revenue = pQ
Quantity Equation - Answers - Q= F/(p-c)
A hospital is considering a new procedure to be offered at $200 per patient. The fixed
cost per year would be $100,000 with total variable costs of $100 per patient. What is
the break-even quantity for this service? Use both algebraic and graphic approaches to
get the answer. - Answers - 1000 patients
variables for buy/make options - Answers - F sub b
The fixed cost (per year) of the buy option
F sub m
The fixed cost of the make option
c sub b
The variable cost (per unit) of the buy option
c sub m
The variable cost of the make option
total costs to make/buy - Answers - -Total cost to buy
Fb + cbQ
-Total cost to make
Fm + cmQ
Q= (Fm-Fb)/(cb-cm)
A fast-food restaurant featuring hamburgers is adding salads to the menu
, The price to the customer will be the same
Fixed costs are estimated at $12,000 and variable costs totaling $1.50 per salad
Preassembled salads could be purchased from a local supplier at $2.00 per salad
Preassembled salads would require additional refrigeration with an annual fixed cost of
$2,400
Expected demand is 25,000 salads per year
What is the break-even quantity? - Answers - (12000-2400)/(2-1.50)=19200 salads
Operations Management - Answers - The systematic design, direction, and control of
processes that transform inputs into services and products for internal, as well as
external, customers
supply chain management - Answers - The synchronization of a firm's processes with
those of its suppliers and customers to match the flow of materials, services, and
information with customer demand
Supply chain - Answers - An interrelated series of processes within and across firms the
produces a service or product to the satisfaction of customers
manufacturing process vs. service process - Answers - manufacturing:
Physical, durable output, Output can be inventoried, Low customer contact, Long
response time, Capital intensive, Quality easily measured
service:
Intangible, perishable output, Output cannot be inventoried, High customer contact,
short response time, Labor intensive, Quality not easily measured
Supply Chain View - Answers - Each activity in a process should add value to the
preceding activities; waste and unnecessary cost should be eliminated
Supplier relationship process - Answers - - A process that selects the suppliers of
services, materials, and information and facilitates the timely and efficient flow of these
items into the firm
New service/product development - - Answers - A process that designs and develops
new services or products from inputs from external customer specifications or from the
market
Order fulfillment process - - Answers - A process that includes the activities required to
produce and deliver the service or product to the external customer
Customer relationship process - - Answers - A process that identifies, attracts and
builds relationships with external customers and facilitates the placement of orders by
customers
(customer relationship management)
