BIS 963 Operations management
Assignment 5 (Capacity Planning)
The Problem:
A small Motel is considering three capacity alternatives: A, B, and
C. Alternative A would have an annual fixed cost of $120,000 and
variable costs of $22 per client. Alternative B would have annual
fixed costs of $130,000 and variable costs of $20 per client.
Alternative C would have fixed costs of $90,000 and variable costs
of $30 per client. Revenue is expected to be $50 per client for the
three alternatives.
(1) Which alternative is the best economically?
(2) Which alternative will produce the highest profits for an
annual output of 10,000 client?
(3) Which alternative would require the lowest number of
clients to generate an annual profit of $50,000?
Why? – Comment on the results obtained in each case
Submission:
Write a report that should not be less than 3 pages (use figures
and graphs whenever necessary).
a) Send your report via Moodle Platform
b) Always list down the references you’ve used at the end of your
memo report, if any.
c) Work alone. This is not a group assignment.
d) Always use the assignment form provided in the course web
site to submit your feedback.
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