Downtime is reducing revenues, customer service is negatively impacted, and repair costs are mounting. You are evaluating two new tractors. The 2011 tractor will become a lawn ornament at a local university.

Factors:

Operating hours per day = 22

Operating days per week = 7

Weeks of operation per year = 50

Average miles per hour = 51.8

Projected fuel price per gallon = $3.30

Tractor A:

2020 White Freightliner; priced @ $169,000; EPA miles per gallon rating = 5.75; insurance per year = $7,900; routine annual maintenance = $28,000.

Tractor B:

2020 Volvo; priced @ $186,000; EPA miles per gallon rating = 6.8; insurance per year = $8,800; routine annual maintenance = $34,000.

Questions to be answered:

1. How many miles per year will the new tractor travel?

2. What are the total operating costs per year for each of the tractors being evaluated, including depreciation based upon 6 years (purchase price/6)?

3. What is the total cost per mile driven for each of the two tractors being evaluated? Calculate cost per mile for only the first year of operation.

4. Make a purchase choice between the 2 new tractors.

Note: Do not factor in discounted cash flow, interest, residual value. Only use the givens. Work answers out to 3 decimals. Show your math.

20 Points

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OSCM Assignment 2 – Cost Justification

Your mission is to determine whether or not to purchase replacement equipment based upon the numbers given below.

Existing Equipment:

• Depreciation Cost Per Year = -0- (fully depreciated)

• Maintenance Cost = $13,000 per year

• Operator Labor = 2 people per shift, $13.50 per hour, 2080 hours worked per person, 2 shifts of operation @ 8 hours each

• Grand Total Overtime Hours = 333 per year

• Employee Benefits = 40% of all wages

• NRG Consumption = $73 per operating day

Note: Overtime hours are paid at a rate of 150% of regular pay for hours over 8 per shift.

Proposed Replacement Equipment:

• Depreciation Cost Per Year of Proposed Equipment = Purchase price of $240,000; economic life of 8 years; straight line

• Maintenance Cost = $12,000 per year

• Operator Labor = 1 person per shift, $13.50 per hour, 2080 hours worked per person, 2 shifts of operation @ 8 hours each

• Grand Total Overtime Hours = -0-

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• Employee benefits = 40% of all wages

• NRG Consumption = $31 per operating day

Answer the following:

1. What is the total cost difference, per year, for operating the replacement equipment versus the existing equipment?

· Replacement Equipment Annual Cost = $

· Existing Equipment Annual Cost = $

· Difference in Cost per Year = $

2. What other consideration must you give to making the decision to keep or replace existing equipment?

20 points

OSCM Assignment 3 – Medical Claims Staffing

Factors:

15,000,000 claims processed per year

Average time required to process one (1) claim = 13.8 minutes

Schedule: 5 days, 7.5 hour shifts, 1 shift, 49 weeks (use one decimal)

32 square feet required per processor

1 break room required for every 100 workers; 1600 sq. ft. each

1 unisex restroom required per 100 workers; 144 square feet each

Administrative offices require a total of 6000 square feet

Your assignments:

1. Calculate the number of workers required each day to process claims; zero absenteeism; round up to closest person.

2. If workers ride-share at two (2) workers per vehicle; how many parking spaces are required for workers?

3. How many break rooms are required; round up?

4. How many rest rooms are required; round up?

5. Calculate the total square footage required for the claims processors, administrative offices, break rooms, restrooms, and 1920 square feet of walk ways.

6. Using a wage of $18.68 per hour, zero overtime, what is the total annual payroll for all claims processors?

7. Calculate annual benefits for all claims processors @ 37.8% of payroll.

8. What is the additional cost of a 3.75% increase in combined wages and benefits for 1 year, for all processors?

30 Points

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