MGT613 Production / Operations Management GDB Solution Spring 2013

Crescent electronics is currently dealing with mobile phones and in their developmental tactics they are considering to add a new product line of tablet computers in their operations, which will surely require new technology, appropriate equipment along with skilled labor force. For this purpose procurement department of the organization is planning to lease the equipment required and estimated that the equipment could be leased at a monthly payment of Rs. 800,000. Along with this they developed an approximation that the variable costs would be Rs. 4000 per Tablet computers and it would be sold for Rs. 40,000 in Pakistani markets.

As an assistant manager of operations department you are required to calculate the followings:

  1. How many Tablet computers would be sold at the breakeven point?
  2. What would be the profit or loss if the 100 Tablet computers are manufactured and sold in the period of 1 month?
  3. If the company wants to have a profit of Rs. 50,000, how many Tablet computers must be sold to the customers?

Solution:

Leased at a monthly payment= Rs. 800,000

Variable costs = Rs. 4000 per Tablet computers

Sold = Rs. 40,000

a)      Breakeven point =?

 

QBEP = FC/ R-VC

QBEP = 800,000/40,000-4000

QBEP = 800,000/36000

QBEP = 22.23 tablet computers

b)     Profit or loss=?

Q= 100

P= Q(R-VC)-FC

P= 100(40,000-4000)-800,000

P= 2800,000 profit

 

c)      how many Tablet computers must be sold to the customers= ?

 

Profit of Rs. 50,000

Q = (FC+P)/ (R-VC)

 

Q= 800,000+50,000/40,000-4000

Q= 850000/36000

Q= 23.61 tablet computers

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