1. [Textbook 10th edition, page 27; not in the 9th edition] The Morning Brew Coffee
shop sells regular, Cappuccino, and Vienna blends of coffee. The shops current
daily labor cost is $320, the equipment cost is $125, and the overhead cost is
$225. Daily demands, along with selling price and materials costs per beverage,
are given below.
Beverages sold
Price per
beverage
Material
Regular
coffee
Cappuccino
Vienna coffee
350
$2.00
100
$3.00
150
$4.00
$0.50
$0.75
$1.25
Harald Luckerbauer, the manager at Morning Brew Coffee Shop, would like to
understand how adding Eiskaffee (a German coffee beverage of chilled coffee,
milk, sweetener, and vanilla ice cream) will alter the shops productivity. His
market research shows that Eiskaffee will bring in new customers and not
cannibalize current demand. Assuming that the new equipment is purchased
before Eiskafee is added to the menu, Harald has developed new average daily
demand and cost projections. The new equipment cost is $200, and the overhead
cost is $350. Modified daily demands, as well as selling price and material costs
per beverage for the new product line, are given below.
Beverages sold
Price per beverage
Material
output
Regular coffee
350
$2.00
$0.50
700
Cappuccino
100
$3.00
$0.75
300
Vienna coffee
150
$4.00
$1.25
600
Eiskaffee
75
$5.00
$1.50
375
M after = 1975/ (350*0.5) + (100*0.75) + (150 * 1.25) + (75 * 1.50) + 320 + 200 + 350 =
1975/1420= 1.39
Change in multifactor productivity = 1.44-1.39 = 0.05
b. If everything else remains unchanged, how many units of Eiskaffee would
have to be sold to ensure that the multifactor productivity increases from
its current level?
Output/Input = Coffee sold in $/Labor cost + Material cost + Equipment cost +
Overhead cost = 1.44
Coffee sold in $
output
1.4447
input
Labor cos t Material cos t Equipment cos t Overhead cos t
350($2) 100($3) 150($4) x ($5)
1.4447
$320 (350($.5) 100($.75) 150($1.25) x ($1.5)) 200 350
$1600 $5.0 x
1.4447
$1307.5 $1.5 x
$1600 $5 x 1.4447($1307.5 $1.5 x )
$1600 5 x 1888.945 2.1670 x
2.833 X 288.945
x 102
2. [Textbook 10th edition, page 46; 9th edition, page 48] Hahn Manufacturing
purchases a key component of one of its products from a local supplier. The
current purchase price is $1,500 per unit. Efforts to standardize parts succeeded to
the point that this same component can now be used in five different products.
Annual component usage should increase from 150 to 750 units. Management
5.95
3
Fixed cost
Range of volume
Breakeven point
2 lines
10500
900
3560
The manager should have 1 line. Between 14 and 18 cars per hours means 4200
and 5400 cars/month. The manager will make a higher profit with one line
compared to two lines.
4. [Textbook 9th and 10th edition, page 149] The manager of Perrottis Pizza collects
data concerning customer complaints about pizza delivery. Either the pizza arrives
late, or the wrong pizza is delivered.
Problem
Topping is stuck to box lid
Frequency
17
35
9
6
4
3
6