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MGT613 Production / Operations Management Assignment 01 Fall 2020 Solution / Discussion

PRODUCTION/OPERATIONS MANAGEMENT (MGT613)
ASSIGNMENT NO.1
FALL2020

Description:
Amna Sports Company deals in manufacturing of sports equipments which are not only supplied across the country but are also exported abroad. The firm is currently operating at three different locations. It has future plans of consolidating its assembly of production at a single location. The proposed location will have a fixed monthly cost of 420,000 per month and a variable cost of Rs. 30 per unit. The selling price of each unit is Rs. 70 per unit.

Requirements:
A. What will be the Total cost, Total Revenue and Total Profit for monthly volumes of
following production? (Marks: 3+3)
1. 10,000 Units
2. 15,000 Units
B. What would be the breakeven point? (Marks: 4)
Note: Do mention the formulas along with calculations to get good grades.

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MGT613 assignment no 01 solution fall 2020

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MGT613_Assignment_No_01_Solution_Fall_2020

MGT613 ASSIGNMENT NO.1 FALL2020

 

Description:

 

Amna Sports Company deals in manufacturing of sports equipments which are not only supplied across the country but are also exported abroad.

The firm is currently operating at three different locations.

 It has future plans of consolidating its assembly of production at a single location.

 The proposed location will have a fixed monthly cost of 420,000 per month and a variable cost of Rs. 30 per unit. The selling price of each unit is Rs. 70 per unit.

Requirements:

 

  • What will be the Total cost, Total Revenue and Total Profit for monthly volumes of following production? (Marks: 3+3)
  • Q= 10,000 Units Produced
  • Q=15,000 Units Produced

 

 

 

 

 

Fixed cost, FC = Rs. 420,000 per month

Variable cost, VC = Rs. 30 per unit

Selling price, R = Rs. 70 per unit

 

  • Q= 10,000 Units Produced

 

  • Total Cost, TC  = FC  + TVC
  • Total Revenue, TR = R * Q
  • Total Profit, TP  = TR-TC

 

 

   TVC = Q * VC/unit

            = 10,000 * 30                  = 300,000

           

  • Total Cost, TC  =  FC  + TVC

                            =   420,000 + 300,000      = Rs. 720,000

 

  • Total Revenue, TR = R/unit * Q

    =  70 * 10,000

   =   700,000

 

  • Total Profit, TP  = TR-TC

                                = 700,000 – 720,000

                               =  - 20,000 (Loss)

                          

 

2) Q=15,000 Units Produced

 

 

  • Total Cost, TC  = TFC  + TVC
  • Total Revenue, TR = R * Q
  • Total Profit, TP  = TC- TR

 

 

   TVC  = Q * VC/unit

            =  15,000 * 30                  = 450,000

           

  • Total Cost, TC  =  FC  + TVC

                                  =   420,000 + 450,000      = Rs. 870,000

 

  • Total Revenue, TR = R/unit  * Q

     = 70 * 15,000

     =   1,050,000

 

  • Total Profit, TP  = TR- TC

                                = 1,050,000 -870,000

                               =   180,000 (Profit)

 

 

 

 

 

 

 

  • What would be the breakeven point? (Marks: 4)

 

The point at which Profit =0 is called breakeven point

 

QBEP = FC/ R-VC

         = 420,000/ 70-30

 

          = 10,500

 

 

 

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