Operations Management

## Second Quiz

Answer **all three** of the following Roman Numeral Questions (I, II, III). Equal credit.

- The Ready lite Company produces a flashlight in which product managers are trying to decide how long a warranty to issue.

If the managers believe the life of the flashlight follows a normal distribution with a mean of 3.5 years and a standard deviation of 1.50 years):

Mean = 3.5

Sdtev =1.50

Z = (x – mu)/stdev

- What percentage of flashlights sold can they anticipate will be returned within the first one and one-halfyears?

X=

- What percentage of flashlights sold can they anticipate will be returned within two and one-half years?
- What percentage of flashlights sold can they anticipate will be returned between the first one and one-half and three and one-half years?

- Suppose a company has a design maximum output of 280. Its actual output is 195 and its efficiency is 80%. Calculate its effective output and its capacity utilization.

III. Suppose a company has a fixed cost of $140,000 and a variable cost per unit of $9. It sells its product for $14.

- Calculate its break-even level of output.
- Calculate how much it must produce to make $145,000, assuming it can sell it all.

Extra credit – 15 points. If it can outsource, and buy the product wholesale from a distributor at $11 each, over what level of output should it buy from the wholesaler, and over what level should it produce on its own?