Case Study Homework
Case Study Homework
- Illustrate a basic process flow diagram for Harvest.
- How does Harvest generate revenue? What are Harvest’s costs? Include those costs and revenue sources on the process flow diagram.
- What is the key profitability driver for Harvest, i.e., what drives greater profits?
- How many tons of waste does the plant need to process per year in order to break even? What would be the potential profit (or loss) if the plant operates at capacity? (Hint, find the marginal revenue/costs per ton, and the fixed costs per year to find the break-even quantity. Use the provided assumptions and formulas to capture variable costs/variable revenue/fixed costs to support your decision.)
- Compare/contrast the pre-processing and source separation options. What are the pros and cons of each?
- How does preprocessing or source separation change the process flow? Illustrate two new process flow diagrams for the pre-processing and source separation options and include on the diagrams for each option the new costs and revenue sources (if any).
- How many tons of waste does each option need to process per year in order to break even? (Same process as above.)
- Which option would you recommend and why?
Definitions of and hints for avoiding plagiarism can be found at https://wp.odu.edu/plagiarism/.
Assumptions/additional information
- Benefits cost an additional 40% of an employee’s salary.
- Assume straight line depreciation for equipment, i.e., total cost divided by expected years of use.
For those who might not remember capacity planning/cost-volume analyses, refer to the following formulas to help.
TC = total cost
FC = total fixed costs
VC = total variable costs
v = variable cost per unit
Q = quantity or volume of output
TR = total revenue
R = revenue per unit
QBEP = break-even point (quantity)
P = Profit
Total costs = total fixed costs + total variable costs
TC = FC + VC
Total variable costs = quantity*variable cost per unit
VC = Q*v
Total revenue = revenue per unit*quantity
TR = R*Q
Profit can be derived from any of the following:
Total revenue – total costs = P = TR – TC
Revenue per unit – (fixed costs + variable cost per unit *quantity) = P = R*Q – (FC + v*Q)
Quantity*(revenue per unit – variable cost per unit) – total fixed costs = P = Q(R – v) – FC
Break even quantity = fixed costs/(revenue per unit – variable cost per unit)
