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  • Solutions To End of Chapter Problems 5

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    Omar Al-azzawi
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    This document provides solutions to end-of-chapter problems from the textbook "Matching Supply with Demand: An Introduction to Operations Management". It discusses two cases: Crazy Cab and Penne Pesto. For Crazy Cab, it analyzes the business model and key value drivers like empty distance, trips per day, and trip distance. It also examines efficiency metrics. For Penne Pesto, it calculates return on invested capital based on given financial details and explores how streamlining clean-up or reducing overhead costs could increase revenue and improve returns.

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    matching supply with demand solution manual for chapter 5 problems

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    Solutions to End of Chapter Problems 5

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    This document provides solutions to end-of-chapter problems from the textbook "Matching Supply with Demand: An Introduction to Operations Management". It discusses two cases: Crazy Cab and Penne Pesto. For Crazy Cab, it analyzes the business model and key value drivers like empty distance, trips per day, and trip distance. It also examines efficiency metrics. For Penne Pesto, it calculates return on invested capital based on given financial details and explores how streamlining clean-up or reducing overhead costs could increase revenue and improve returns.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    3K views2 pages

    Solutions To End of Chapter Problems 5

    Uploaded by

    Omar Al-azzawi
    This document provides solutions to end-of-chapter problems from the textbook "Matching Supply with Demand: An Introduction to Operations Management". It discusses two cases: Crazy Cab and Penne Pesto. For Crazy Cab, it analyzes the business model and key value drivers like empty distance, trips per day, and trip distance. It also examines efficiency metrics. For Penne Pesto, it calculates return on invested capital based on given financial details and explores how streamlining clean-up or reducing overhead costs could increase revenue and improve returns.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    of 2

    Matching Supply with Demand: An Introduction to Operations Management

    Solutions to End-of-Chapter Problems


    (last revised February 25, 2008; make sure to visit www.cachon-terwiesch.net for the latest updates, excel files, ppt
    files and other information)

    Chapter 5
    5.1. Crazy Cab
    a. see tree below
    b. see tree below
    c. Value drivers include the % of distance driven empty, the number of trips per day, and the
    distance of the trip. This is a high fix cost business with lots of capital, thus the more
    revenue you can squeeze out of the cabs, the more money you make. And interesting
    issue would be to see if by reducing the time the cab drives empty, one could increase the
    number of trips further
    d. Similar to the airline ratios discussed previously. We can look at labor efficiency as:
    Revenue/ labor cost = Revenue / mile * miles/trip * trips / day * days/ labor cost

    Revenue
    $2.336M

    Price per
    trip

    Price per mile: $2


    Fixed fee: $2
    Distance: 3 miles

    # of trips
    Margin
    $689k

    # of cabs: 20
    Labor
    Cost: 20 drivers * 24hours * 8$/hour
    Cost
    $1.4M (labor)
    +$245k (fuel)

    Return on
    Invested
    Capital
    49%

    Trips per cab: 40

    Working
    capital
    Invested
    Capital
    $1.4M

    Distance
    Fuel and Maintenance:
    total distance

    $0.20 per mile

    No information given in question;


    relatively small

    Number of cabs: 20
    Fixed
    capital

    Cab: $20k
    Capital per cab

    Medaillon: $50K

    The first ratio is the pricing power, the second the length of a trip, the third how many trips
    we get out of a cab, and the fourth is a measure of wage rates.

    Q5.2. Penne Pesto


    a. The restaurant will serve 200 guests on an evening
    b. The ROIC is 18.25% (based on $100 net profit per day)
    c. Making the clean-up faster allows to turn over the table quicker and leads to an increase
    in the number of guests served. We get 218 guests served and a 66% ROIC
    d. A reduction in OH cost has a less dramatic effect. New ROIC would be 36.5%

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