Exam 24: Process Strategy

The local convenience store makes personal pan pizzas. Currently, their oven can produce 50 pizzas per hour. It has a fixed cost of $2,000, and a variable cost of $0.25 per pizza. The owner is considering a bigger oven that can make 75 pizzas per hour. It has a fixed cost of $3,000, but a variable cost of $0.20 per pizza. a. At what quantity do the two ovens have equal costs? b. If the owner expects to sell 9,000 pizzas, should he get the new oven?

__________ is actual output as a percent of effective capacity.

The net present value of $10,000 to be received in exactly three years is considerably greater than $10,000.

A local business owner is considering adding another employee to his staff in an effort to increase the number of hours the store is open per day. a. If the employee will cost the owner $4,000 per month and the store takes in $50/hour in revenue with variable costs of $15/hour, how many hours must the new employee work for the owner to break even? b. The employee again costs $4000 and has agreed to work 120 hours. If variable costs remain at $15/hour and revenue is uncertain with a 40% chance of being $40/hour, 35% chance of being $20/hour, and 25% chance of being $35/hour should the owner hire the employee?

A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, the net present value of this investment is

Adding a complementary product to what is currently being produced is a demand management strategy used when

What is the fundamental distinction between design capacity and effective capacity? Provide a brief example.