Transcript COB 300C - The Operations Dimension

COB 300C - The Operations Dimension
Capacity Homework
SP1. O’Hara Software Company is considering expanding its networking portion of the
business. Presently, the company has three networking staff members working at
corporate headquarters. O’Hara is examining two options. The first would involve
adding six new staff members and building a new facility at the present site. The annual
cost of this option, including personnel, is $500,000. The second option involves adding
twelve new staff members and building a larger facility at a new location. The annual
cost of this option, including personnel, is $1,200,000. O’Hara is looking at the profit
potential over the next five years. Management estimates that the present staff can
handle up to $2,000,000 in sales over the five-year period, that six additional staff
positions allow it to handle up to $6,000,000, and that twelve additional staff positions
allow it to handle up to $10,000,000. What do you recommend.
Anticipated Demand Over Five Years
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
Probability
.15
.25
.25
.25
.10
1.00
Do Nothing
.15
2 MM
.25
4 MM
Add 6 Employees
.6
(new facility at current location)
Add 12 Employees
(new facility at new location)
2 MM
6 MM
.
.15
2 MM
.25
4 MM
.25
6 MM
.25
8 MM
.10
10 MM
1.00
Do Nothing
.15
2 MM – 500,000
.25
4 MM – 500,000
Add 6 Employees
.6
(new facility at current location)
Add 12 Employees
(new facility at new location)
2 MM
6 MM – 500,000
.
.15
2 MM – 1,200,000
.25
4 MM – 1,200,000
.25
6 MM – 1,200,000
.25
8 MM – 1,200,000
.10
10 MM – 1,200,000
1.00
2 MM
2MM
Do Nothing
.15
2 MM – 500,000 = 1,500,000
.25
4 MM – 500,000 = 3,500,000
4.4MM
Add 6 Employees
.6
(new facility at current location)
6 MM – 500,000 = 5,500,000
.
4.6MM
Add 12 Employees
(new facility at new location)
.15
2 MM – 1,200,000 = 800,000
.25
4 MM – 1,200,000 = 2,800,000
.25
6 MM – 1,200,000 = 4,800,000
.25
8 MM – 1,200,000 = 6,800,000
.10
10 MM – 1,200,000 = 8,800,000
1.00
2 MM
2MM
Do Nothing
.15
2 MM – 500,000 = 1,500,000
.25
4 MM – 500,000 = 3,500,000
4.4MM
Add 6 Employees
.6
(new facility at current location)
6 MM – 500,000 = 5,500,000
.
4.6MM
Add 12 Employees
(new facility at new location)
.15
2 MM – 1,200,000 = 800,000
.25
4 MM – 1,200,000 = 2,800,000
.25
6 MM – 1,200,000 = 4,800,000
.25
8 MM – 1,200,000 = 6,800,000
.10
10 MM – 1,200,000 = 8,800,000
SP2. Bambino’s Bistro and Restaurant has been open for business for
nearly three years, and business is better than ever. Management is
contemplating another restaurant in a nearby suburb. Their plan is to build
a restaurant to serve about 180 people per hour. The restaurant will have a
game room, a bar area, and a dining area. From previous experience,
management anticipates that 25 percent of the customers will come
primarily for the game room, 20 percent for the bar, and 55 percent for
dining. The average stay is 75 minutes per customer, and approximately
2.2 people arrive per car. Typically, very few people in the game room
order dinner. Each meal prepared per hour requires 4.5 square feet of
kitchen area. It is very difficult to push the occupancy for the bar above 90
percent and for the dining area above 90 percent because some parties of
two or three are seated at tables for four. The 180 people per hour is the
arrival rate.
a. How large should the parking area, bar area, game room, dining area,
and kitchen area be to serve 180 people per hour?
b. What would happen to the capacities of the areas if the system capacity
is to be increased by 10 percent?
AREA
CAPACITY
Parking
Game Room
Bar
Dining
Kitchen
(180 people/hr.)(1.25 hrs.)/2.2 people/car
(180 people/hr.)(.25)(1.25 hrs.)/(1 people/seat)
(180 people/hr.)(.20)(1.25 hrs.)/(.9 people/seat)
(180 people/hr.)(.55)(1.25 hrs.)/(.9 people/seat)
(180 people/hr.)(.25)(0 meals/person) +
(180 people/hr.)(.20)(.3 meals/person) +
(180 people/hr.)(.55)(1 meal/person)
= 102 cars
= 56 seats
= 50 seats
= 138 seats
110 meals requires (110 meals)(4.5 s.f./meal)
= 494 square
feet
= 110 meals
Handout Problem # 13
Small demand (.4)
$1.0
Do Nothing
$1.3
Expand
$1.3
Do Nothing
$1.5
Expand
$1.6
Build
$1.8
Do Nothing
$0.7
Other Use #1
$1.5
Other Use #2
$1.0
Medium Demand (.5)
Large Demand (.1)
Subcontract
Small demand (.4)
Expand
Medium demand (.5)
Large demand (.1)
$1.6
Do Nothing
$1.6
Subcontract
$1.5
Build
$1.7
Do Nothing
($0.9)
Other Use #1
$1.4
Other Use #2
$1.0
Do Nothing
$1.0
Other Use #1
$1.1
Other Use #2
$0.9
Build
Small demand (.4)
Medium demand (.5)
Large demand (.1)
$2.4
Small demand (.4)
$1.0
Do Nothing
$1.3
Expand
$1.3
Do Nothing
$1.5
Expand
$1.6
Build
$1.8
Do Nothing
$0.7
Other Use #1
$1.5
Other Use #2
$1.0
Medium Demand (.5)
Large Demand (.1)
1.23 MM
Subcontract
Small demand (.4)
1.57 MM
Expand
Medium demand (.5)
Large demand (.1)
1.35 MM
$1.6
Do Nothing
$1.6
Subcontract
$1.5
Build
$1.7
Do Nothing
($0.9)
Other Use #1
$1.4
Other Use #2
$1.0
Do Nothing
$1.0
Build
Small demand (.4)
Medium demand (.5)
Other Use #1
Other Use #2
Large demand (.1)
$1.1
$0.9
$2.4
a
Small demand (.4)
$1.0
Do Nothing
$1.3
Expand
$1.3
Do Nothing
$1.5
Expand
$1.6
Build
$1.8
Do Nothing
$0.7
Other Use #1
$1.5
Other Use #2
$1.0
Medium Demand (.5)
Large Demand (.1)
1.23 MM
Subcontract
Small demand (.4)
1.57 MM
Expand
Medium demand (.5)
Large demand (.1)
1.35 MM
$1.6
Do Nothing
$1.6
Subcontract
$1.5
Build
$1.7
Do Nothing
($0.9)
Other Use #1
$1.4
Other Use #2
$1.0
Do Nothing
$1.0
Build
Small demand (.4)
Medium demand (.5)
Other Use #1
Other Use #2
Large demand (.1)
$1.1
$0.9
$2.4
Extra Problem (additional practice)
A firm that plans to expand its product line must decide whether to build a small or a large facility to
produce the new products. If it builds a small facility and demand is low, the net present value after
deducting for building costs will be $400,000. If demand is high, the firm can either maintain the
small facility or expand it. Expansion would have a net present value of $450,000, and maintaining
the small facility would have a net present value of $50,000.
If a large facility is built and demand is high, the estimated net present value is $800,000. If demand turns
out to be low, the net present value will be negative $10, 000.
The probability that demand will be high is estimated to be .60, and the probability of low demand is
estimated to be .40.
Analyze using a tree diagram.
400,000
.4
low
Small
.6
high
50,000
maintain
.
expand
450,000
Large
low
.4
-10,000
.
high
.6
800,000
400,000
.4
low
Small
.6
high
50,000
maintain
.
expand
450,000
Large
low
.4
-10,000
.
high
.6
800,000
400,000
.4
low
430,000
Small
.6
50,000
high
maintain
.
expand
450,000
476,000
Large
low
.4
-10,000
.
high
.6
800,000
400,000
.4
low
430,000
Small
.6
50,000
high
maintain
.
expand
450,000
476,000
Large
low
.4
-10,000
.
high
.6
800,000