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1. Determine the utilization and the efficiency for each of these situations: (a) A loan processing operation that processes an average of 6 loans per day. The operation has a design capacity of 10 loans per day and an effective capacity of 8 loans per day. (b) A furnace repair team that services an average of four furnaces a day if the design capacity is six furnaces a day and the effective capacity is five furnaces a day. [Hint: Please read Example 1 on page 189 in the text book.] Please solve the following problem related to cost-volume analysis 2. A producer of pens has fixed costs of $36,000 per month which are allocated to the operation and variable costs are $0.80 per pen. (a) Find the break-even quantity if pens sell at $2.0 each. (b) Find the profit if the company produces 35,000 pens and pens sell at $2.0 each? Show work as well

Q1)
a) Processing loans = 6/day
Design capacity = 10/day
Effective capacity = 8/day
Utilization = (6/10)*100 = 60%
Efficiency = (6/8)*100 = 75%
b) Average furnaces sold = 4/day
Design capacity = 6/day
Effective capacity = 5/day
Utilization = (4/6)*100 = 66.67%
Efficiency = (4/5)*100 = 80%
Q2) Fixed cost = 36000 $/month
Variable cost = 0.8$/pen
a) Breakeven quantity = (Fixed Cost)/(Selling price – Variable cost) = 36000/(2-0.8) = 30000 units
b) Profit = Revenue – Costs = Revenue – (Fixed cost+Variable cost) = (2*35000)-(36000+(0.8*35000)) = 6000 $
 
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