Operations methods: job, batch, flow, mass customisation — practice questions

Standard chairs: Flow or batch — predictable demand, low unit cost competes on price; inventory of popular models.

Custom fit-outs: Job production — unique specs, site measurement, skilled joiners; quote per project.

Optional hybrid: Mass customisation for chair fabrics/colours online while frame is batch-built — links 3.3.4 product variety with efficient base production.

Step 1: Calculate Total Cost for Batch Production

1. Number of batches: 100,000 packs / 1,000 packs per batch = 100 batches
2. Total setup costs: 100 batches * $200/batch = $20,000
3. Total variable costs: 100,000 packs * $0.80/pack = $80,000
4. Total Annual Cost (Batch): Fixed Costs + Total Setup Costs + Total Variable Costs $50,000 +$20,000 + $80,000 = **$150,000**

Step 2: Calculate Cost per Unit for Batch Production

• Unit Cost (Batch): Total Annual Cost / Total Packs $150,000 / 100,000 packs = $1.50 per pack

Step 3: Calculate Total Cost for Flow Production

1. Annual machinery cost (depreciation): $250,000 / 5 years = $50,000 per year
2. Total fixed costs: Annual Fixed Costs + Annual Machinery Cost $80,000 +$50,000 = $130,000$
3. Total variable costs: 100,000 packs * $0.30/pack = $30,000
4. Total Annual Cost (Flow): Total Fixed Costs + Total Variable Costs $130,000 +$30,000 = **$160,000**$

Step 4: Calculate Cost per Unit for Flow Production

• Unit Cost (Flow): Total Annual Cost / Total Packs $160,000 / 100,000 packs = $1.60 per pack

Step 5: Recommendation

Based on these calculations, Batch Production is the more cost-effective method at an annual output of 100,000 units. It has a lower total annual cost ($150,000 vs$160,000) and a lower cost per unit ($1.50 vs$1.60). The high initial investment and fixed costs of flow production are not justified at this production volume.