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a ery xamp ea ery xamp e

Actual production last week =Actual production last week = 148,000148,000 rollsrolls==Design capacity =Design capacity = 1,2001,200 rolls per hourrolls per hourBakery operatesBakery operates 77 days/week,days/week, 33 -- 88 hour shiftshour shifts

= == =

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a ery xamp ea ery xamp e

Actual production last week =Actual production last week = 148,000148,000 rollsrolls==Design capacity =Design capacity = 1,2001,200 rolls per hourrolls per hourBakery operatesBakery operates 77 days/week,days/week, 33 -- 88 hour shiftshour shifts

= == =

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a ery xamp ea ery xamp e

Actual production last week =Actual production last week = 148,000148,000 rollsrolls==Design capacity =Design capacity = 1,2001,200 rolls per hourrolls per hourBakery operatesBakery operates 77 days/week,days/week, 33 -- 88 hour shiftshour shifts

= == =

UtilizationUtilization = 148,000/201,600 = 73.4%= 148,000/201,600 = 73.4%

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a ery xamp ea ery xamp e

Actual production last week =Actual production last week = 148,000148,000 rollsrolls==Design capacity =Design capacity = 1,2001,200 rolls per hourrolls per hourBakery operatesBakery operates 77 days/week,days/week, 33 -- 88 hour shiftshour shifts

= == =

UtilizationUtilization = 148,000/201,600 = 73.4%= 148,000/201,600 = 73.4%

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a ery xamp ea ery xamp e

Actual production last week =Actual production last week = 148,000148,000 rollsrolls==Design capacity =Design capacity = 1,2001,200 rolls per hourrolls per hourBakery operatesBakery operates 77 days/week,days/week, 33 -- 88 hour shiftshour shifts

= == =

UtilizationUtilization = 148,000/201,600 = 73.4%= 148,000/201,600 = 73.4%

EfficiencyEfficiency = 148,000/175,000 = 84.6%= 148,000/175,000 = 84.6%

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a ery xamp ea ery xamp e

Actual production last week =Actual production last week = 148,000148,000 rollsrolls==Design capacity =Design capacity = 1,2001,200 rolls per hourrolls per hourBakery operatesBakery operates 77 days/week,days/week, 33 -- 88 hour shiftshour shifts

= == =

UtilizationUtilization = 148,000/201,600 = 73.4%= 148,000/201,600 = 73.4%

EfficiencyEfficiency = 148,000/175,000 = 84.6%= 148,000/175,000 = 84.6%

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a ery xamp ea ery xamp e

Actual production last week =Actual production last week = 148,000148,000 rollsrolls==Design capacity =Design capacity = 1,2001,200 rolls per hourrolls per hourBakery operatesBakery operates 77 days/week,days/week, 33 -- 88 hour shiftshour shifts

c encyc ency = .= .Efficiency of new lineEfficiency of new line = 75%= 75%

Expected Output =Expected Output = ((Effective CapacityEffective Capacity)()(EfficiencyEfficiency))

= , . = ,= , . = , ro sro s

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a ery xamp ea ery xamp e

Actual production last week =Actual production last week = 148,000148,000 rollsrolls==Design capacity =Design capacity = 1,2001,200 rolls per hourrolls per hourBakery operatesBakery operates 77 days/week,days/week, 33 -- 88 hour shiftshour shifts

c encyc ency = .= .Efficiency of new lineEfficiency of new line = 75%= 75%

Expected Output =Expected Output = ((Effective CapacityEffective Capacity)()(EfficiencyEfficiency))

= , . = ,= , . = , ro sro s

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Diseconomies of ScaleDiseconomies of Scale

ht)

ht)

2525 -- roomroom 7575 -- roomroomtcost

tcost

perni

perni

5050 -- roomroomroadside motelroadside motel

ageuni

ageuni

rroo

rroo

Aver

Aver

ll

arsp

ll

arsp

EconomiesEconomiesof scaleof scale

DiseconomiesDiseconomiesof scaleof scale

2525 5050 7575

(d(d

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Number of RoomsNumber of Rooms Figure S7.2Figure S7.2

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Management in the Service SectorManagement in the Service Sector

Demand managementDemand management Appointment, reservations, FCFS ruleAppointment, reservations, FCFS rule

apac yapac ymanagementmanagement

Full t ime,Full t ime,

temporary,temporary,partpart--timetimestaffstaff

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rearea -- ven na ys sven na ys sBEPBEPxx == breakbreak--even point ineven point in

unitsunits

BEPBEP$$ == breakbreak--even point ineven point in

xx == number of unitsnumber of unitsproducedproduced

TRTR == total revenue = Pxtotal revenue = Pxo arso ars

PP == price per unit (afterprice per unit (afterall discounts)all discounts)

FF == fixed costsfixed costs

VV == variable cost per unitvariable cost per unit

TCTC == total costs = F + Vxtotal costs = F + Vx

BreakBreak--even pointeven pointoccurs whenoccurs when

TR = TCTR = TC == FForor

Px = F + VxPx = F + Vx

xx PP -- VV

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rearea -- ven na ys sven na ys sBEPBEPxx == breakbreak--even point ineven point in

unitsunits

BEPBEP$$ == breakbreak--even point ineven point in

xx == number of unitsnumber of unitsproducedproduced

TRTR == total revenue = Pxtotal revenue = Pxo arso ars

PP == price per unit (afterprice per unit (afterall discounts)all discounts)

FF == fixed costsfixed costs

VV == variable cost per unitvariable cost per unit

TCTC == total costs = F + Vxtotal costs = F + Vx

BEPBEP$$ = BEP= BEPxx PPFF == --==

FF

PP -- VV

= Px= Px -- ((F + VxF + Vx))

((PP -- VV))/P/PFF

= x= x -- -- xx

== ((PP -- VV))xx -- FF

2008 Prentice Hall, Inc. S7 14

11 -- V/PV/P

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rearea -- ven xamp even xamp e

Fixed costsFixed costs = $10,000= $10,000 MaterialMaterial = $.75= $.75/unit/unit== ==

FF $10,000$10,000$$

11 -- ((V/PV/P)) 11 -- [(1.50 + .75)/(4.00)][(1.50 + .75)/(4.00)]

= = 22,857.14= = 22,857.14.4375.4375

BEPBEPxx = = = 5,714= = = 5,714FF

PP -- VV

$10,000$10,0004.004.00 -- (1.50 + .75)(1.50 + .75)

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rearea -- ven xamp even xamp e

Multiproduct CaseMultiproduct Case

BEPBEP$$ ==FF

VV-- xx

iiPPii

wherewhere VV = variable cost per unit= variable cost per unit

PP = price per unit= price per unit= xe cos s= xe cos s

WW = percent each product is of total dollar sales= percent each product is of total dollar sales

ii = each product= each product

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u pro uc xamp eu pro uc xamp e

Annual ForecastedAnnual Forecasted

Fixed costsFixed costs = $3,500= $3,500 per monthper month

temtem r cer ce ostost a es n tsa es n ts

SandwichSandwich $2.95$2.95 $1.25$1.25 7,0007,000

Soft drinkSoft drink .80.80 .30.30 7 0007 000

Baked potatoBaked potato 1.551.55 .47.47 5,0005,000TeaTea .75.75 .25.25 5,0005,000

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