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Financial Analysis, Project & Quality Management

Question 1Machine AMachine B
Type of EquipmentGeneral purposes
Installed Cost$8,000$13,000
Salvage Value8003,000
Annual Labor Cost6,0003,600
Estimated Life (yrs)105

In adding a new product line, a firm needs a new piece of machinery. An investigator of suitable equipment for the production process has narrowed the choice to the two machines listed.

Assume that at the end of five years, a comparable replacement for Machine B will be available. Using present-value analysis with a 10 percent interest rate, which machine would you choose?

Question 2

A construction project is broken down into the 10 activities listed below.

ActivityPreceding ActivityTime (weeks)

A. Draw the precedence diagram.

B. Find the critical path

C. If activities 1 and 10 cannot be shortened, but activities 2 through 9 can be shortened to a minimum of 1 week each at a cost of $10,000 per week per activity, which activities would you shorten in order to shorten the project by four weeks?

Question 3

Marisa Strauss, a financial analysis for Green Garden Salads, Inc., is currently evaluating three different sites for locating its plant in the greater San Francisco area. This plant will produce prepackaged tossed salads in five-and ten-pound bags. The three locations are (a) Oakland, (b) Petaluma, and (c) San Jose. Marisa estimates that the fixed costs and the variable unit costs associated with each site are as follows:

A. Plot the total costs curves for each of these locations on a single graph and identify the range of outputs for which each alternative site is the most economical.

B. If the vice president of marketing has estimated the demand for prepackaged salads to be 500,000 lb. per year, which location would you pick and why?

Location Fixed Costs per Year Variable Costs per Unit

Oakland $250,000 $10/100lb

Petaluma $100,000 $30/100lb

San Jose $150,000 $20/100lb

Question 4

You are the newly appointed assistant administrator at a local hospital, and your first project is to investigate the quality of the patient meals put out by the food-service department. You conducted a 10-day survey by submitting a simple questionnaire to the 400 patients with each meal, asking that they simply check off either that the meal was satisfactory or unsatisfactory. For simplicity in this problem, assume that the response was 1,000 returned questionnaires from the 1,200 meals each day. The results ran as follows:

Date in December# of Unsatisfactory MealsSample Size

A. Construct a p-chart based on the questionnaire results, using a confidence interval of 95.4 percent, which is two standard deviations.

B. What comments can you make about the results of the survey?

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