BUS FPX 4014 Assessment 2 Manufacturing Decisions

Student Name

Capella University

BUS-FPX4014 Operations Management for Competitive Advantage

Prof. Name

Date

Break Even Analysis

When determining the number of units needed to break even, a break-even analysis is essential. This analysis aids in establishing the optimal price point for the pump.

• Variables:

  • Fixed Cost: $100,000
  • Variable Cost: $50
  • Price: $100

• Formula:

  • ( BEU = \frac{FC}{(P – VC)} )
  • ( BEU = \frac{$100,000}{($100 – $50)} )
  • ( BEU = 2,000 )

Contribution to Profit

The selling price of a product directly impacts profit margins. Setting a higher price per unit carries the risk of lower sales volume, potentially decreasing profit margins and increasing overhead costs. To determine the ideal selling price, a contribution to profit analysis is conducted.

• Formula Used:
  • ( CP = (P – VC) \times UV – FC )

Based on this analysis, the more profitable price point is $100 per pump.

• ( CP = ($100 – $50) \times 3600 )

  • ( CP = $180,000 – $100,000 )
  • ( CP = $80,000 )

• ( CP = ($110 – $50) \times 2900 )

  • ( CP = $174,000 – $100,000 )
  • ( CP = $74,000 )

Reliability of Product

Quality testing evaluates a product’s functionality, while reliability testing assesses its longevity. These measures are crucial for minimizing the risk of returns or defects. The overall reliability of a product is determined using the formula ( RP = R1 \times R2 \times R3 \times R4 \times R5 ). Based on the calculations below, the overall product reliability is ( .979 ).

• ( RP = .997 \times .998 \times .995 \times .999 \times .990 )
  • ( RP = .979 )

Reliability on Product with Subcomponents

When a company produces multiple products, assessing the reliability of all products is necessary. Prioritizing quality and reliability assurance builds trust with consumers and fosters loyalty. The reliability of products with subcomponents is determined using the formula ( RP = SC1R \times (1 – (1 – SC2R) \times (1 – SC3R)) \times SC4R ). Based on the calculations below, the overall reliability of products with subcomponents is ( .901 ).

• ( RP = 0.97 \times (1 – (1 – 0.98) \times (1 – 0.95)) \times 0.93 )
  • ( RP = .901 )

Control Limits

Determining control limits involves establishing upper and lower bounds to monitor product performance and detect fluctuations. The formula for calculating upper control limits is ( UCL = M + (3 \times SD) ), and for lower control limits is ( LCL = M – (3 \times SD) ). Based on the calculations below, the upper control limit is ( 30.111 ), and the lower control limit is ( 29.901 ).

• ( UCL = 30.006 + (3 \times .035) )

  • ( 30.006 + .105 )
  • ( UCL = 30.111 )

• ( LCL = 30.006 – (3 \times .035) )

  • ( 30.006 – .105 )
  • ( LCL = 29.901 )

BUS FPX 4014 Assessment 2 Manufacturing Decisions