Capacity Building - Case Study Example

• Capacity planning would assist the firm in avoiding overcapacity or in other words, assists the company no to operate under costs that are too high.
• Capacity planning would assist the company to avoid under capacity by straining its resources and possibly losing its customers.

Quantity at break-even point for each line will be arrived at as follows:

Quantity at break –even point (QBEP) =Fixed cost divide by total revenue-variable cost per unit

For line 1-       (QBEP) =1,200,000 ∕ (3000×6300)-5200. This translates into 1,200,000 divide by 18894800, which gives 0.063

For line 2-(QBEP) = 1,900,000/(5800×6300)-4800.This translates into 1,900,000 divide by 36535200,which gives 0.052

Line 3-(QBEP) = 2,800,000/ (8200×6300)-4200.This translates into 2,800,000 divide by

51655800, which gives 0.0542

Line 4-(QBEP) =3,600,000/ (11,300×6300)-4400.This translates into 3,600,000 divide by 71, 185, 600, which gives 0.0506

The total cost for each line will be calculated using this formula;

Total cost=fixed cost (FC) +variable cost (VC).

For line 1-TC=1,200,000+ (3000×5,200) =16,800,000

For line 2-TC=1,900,000 + (5800×4,800) =29,740,000

For line 3-TC=2,800,000+ (8200×4,200) =37,240,000

For line 4-TC=3,600,000+ (11,300×4,400) =53,320,000

The profit margin at each line will be determined as follows:

Profit=Total revenue (TR)-Total cost (TC) =R × Q-(FC+v×Q)

For line 1, P= (6300×3000)-1, 200, 000 + (5,200×3000) =

18,900,000-16,800,000=2,100,000

For line 2, P= (6300×5800)-1,900,000+ (4800×5800) =68,000,000

For line 3, P=(6300×8200)-2,800,000+(4200×8200)=14,420,000

For line 4, P= (6300×11,300)-3,600,000+ (4400×11,300) =17,870,000

3. General motors India should invest in three assembly lines, that is line, 2, 3 and 4, since they are the most profitable.

Whirlpool Corporation

Whirlpool Corporation product designers faced the following challenges;

• Their previous product design setup used to crash most often, like three times in a week when pulling through a fairly large assembly necessary to get their job done.
• Producing under capacity due to continuous disruptions and delays in product design and problems. They were able to produce only 1900 units against a capacity of XXXX. Thus Whirlpool's production capacity was greatly reduced and they only managed to produce 1900 units against a potential of more than that figure.

2. Before the improvement the efficiency rate was =actual output/effective capacity, assuming effective capacity( XXXX) to be 3000, then efficiency rate will be determined as follows; 1900/XXXX=, thus 1900/3000=0.633 ×100 = 63%

 Utilization n=actual output/design capacity=1900/XXXX, assuming design capacity is 3800, then, Utilization rate will be 1900/3800=0.5×100 or 50%

After improvement; assuming actual output will be 2800, then the Efficiency rate will be 2800/3000=0.93×100 =93.3%

The utilization rate on the other hand will be 2800/3800=0.736×100=73.6%

3. Some of the ethical, sustainable, and legal issues that product designers should consider when designing a product like the washing machines and refrigerators are high levels of quality so as to make sure that the products do not harm the users or the environment in which they are used.