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Practice Questions Supply Chain

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Practice Examination Questions QUESTIONS ON SUPPLY CHAIN MANAGEMENT SCM 1: In a manufacturing plant, suppose fixed cost is $ 10,000/month. Variable Cost of production is $ 0.80 per unit and the selling price is $ 1.00 per unit. What is the breakeven point? Answer: 50,000 units per month Break Even Point = Fixed Cost / (Selling Price – Variable Cost) = 10000/((1.0 ‐0.8) = 50,000 SCM 2: In a manufacturing plant, suppose fixed cost is $ 5,000/month. Variable Cost of production is $ 0.60 per unit and the selling price is $ .95 per unit. The plant produces 20,000 units per month. What is the profit per month as a percentage of the total cost of production? The total cost includes fixed and variable costs. Answer: 11.76% Total Cost of production = 5,000 + 20,000 * 0.6 = 17,000 Total Revenue = 20,000 * 0.95 = 19,000 Profit as a % of cost = (19,000 – 17,000)/17,000 = 11.76% Note: A similar analysis will be required to find the selling price if the desired % of profit is given. SCM 3: A manufacturing company is considering two suppliers (A and B) to supply a component RQ‐237 for next one year. They have received the following quotes from the two suppliers. Supplier A: Fixed cost/year = $ 10,000; Variable cost per unit = $ 0.8 Supplier B: Fixed cost/year = $ 8,000; Variable cost per unit = $ 0.9 Which supplier should be used? Answer: The indifference point = 20,000 Use Supplier B if the demand is less than 20,000. Use Supplier A if the demand is more than 20,000. Indifference point = (10,000 – 8,000)/(0.9 – 0.8) = 20,000

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