Capacity and

Constraint
Management

Prof.©Dheeraj,
Copyright IIM Kashipur
2017 Pearson Education, Inc. S7 - 1
 Outline
► Capacity
► Bottleneck Analysis and Little’s Law
► Break-Even Analysis
► Reducing Risk with Incremental
Changes

Prof.©Dheeraj,
Copyright IIM Kashipur
2017 Pearson Education, Inc. S7 - 2
 Learning Objectives
When you complete this chapter, you
should be able to:
S7.1 Define capacity
S7.2 Determine design capacity,
effective capacity, and utilization
S7.3 Perform bottleneck analysis
S7.4 Compute break-even

Copyright © 2017 Pearson Education, Inc. S7 - 3

 Capacity
► The throughput, or the number of units
a facility can hold, receive, store, or
produce in a period of time
► Determines
fixed costs
► Determines if
demand will
be satisfied
► Three-time horizons
Copyright © 2017 Pearson Education, Inc. S7 - 4
 Understanding Capacity
▶ Capacity can be viewed in one of two ways:
1. As the rate of production output per unit of time; or
2. As units of resources availability
For example, as an output rate, the capacity of an
automobile plant be the number of automobile capable of
being produced per week and the capacity of a paper mill
as the number of tons it can produce per year. As a
resource availability measure, the capacity of a hospital
would be measured by the number of beds available, and
the capacity of “cloud” storage would be measured in
gigabytes.

Copyright © 2017 Pearson Education, Inc. S7 - 5

 Capacity Planning Questions
▶ Key questions:
▶ What kind of capacity is needed?
▶ How much is needed to match demand?
▶ When is it needed?
▶ Related questions:
▶ How much will it cost?
▶ What are the potential benefits and risks?
▶ Are there sustainability issues?
▶ Should capacity be changed all at once, or through several
smaller changes
▶ Can the supply chain handle the necessary changes?
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 Planning Over a Time Horizon

Examples of Short-and Long-Term Capacity Decisions

Short-Term Capacity Decisions Long-Term Capacity Decisions

• Amount of overtime scheduled for the next • Construction of a new manufacturing

week plant
• Number of emergency room nurses on call • Expanding the size and number of beds
during a downtown festival weekend in a hospital
• Number of call center workers to staff during • Number of branch banks to establish in a
the holiday season new market territory

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 Defining and Measuring Capacity
▶ Two useful definitions of capacity
▶ Design capacity (or theoretical capacity)
▶ The maximum output rate or service capacity an
operation, process, or facility is designed for
(assumes ideal conditions for operations)
▶ Effective capacity
▶ Design capacity minus allowances such as
personal time and maintenance (assumes normal
conditions for operations)
▶ Measure capacity in units that do not require updating
▶ Why is measuring capacity in dollars problematic?
Copyright © 2017 Pearson Education, Inc. S7 - 8
 Design and Effective Capacity
TABLE S7.1 Capacity Measurements
MEASURE DEFINITION EXAMPLE
Design capacity Ideal conditions exist Machines at Frito-Lay are designed to
during the time that produce 1,000 bags of chips/hr., and the plant
the system is operates 16 hrs./day.
available Design Capacity = 1,000 bags/hr. × 16 hrs.
= 16,000 bags/day

Copyright © 2017 Pearson Education, Inc. S7 - 9

 Design and Effective Capacity
TABLE S7.1 Capacity Measurements
MEASURE DEFINITION EXAMPLE
Effective capacity Design capacity Frito-Lay loses 3 hours of output per day
minus lost output (= 0.5 hrs./day on preventive maintenance,
because of planned 1 hr./day on employee breaks, and 1.5
resource hrs./day setting up machines for different
unavailability (e.g., products).
preventive Effective Capacity = 16,000 bags/day
maintenance, – (1,000 bags/hr.)
machine (3 hrs./day)
setups/changeovers, = 16,000 bags/day
changes in product – 3,000 bags/day
mix, scheduled = 13,000 bags/day
breaks)

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 Design and Effective Capacity
TABLE S7.1 Capacity Measurements
MEASURE DEFINITION EXAMPLE
Actual output Effective capacity On average, machines at Frito-Lay are not
minus lost output running 1 hr./day due to late parts and
during unplanned machine breakdowns.
resource idleness Actual Output = 13,000 bags/day
(e.g., absenteeism, – (1,000 bags/hr.)
machine breakdowns, (1 hr./day)
unavailable parts, = 13,000 bags/day
quality problems) – 1,000 bags/day
= 12,000 bags/day

Copyright © 2017 Pearson Education, Inc. S7 - 11

 Utilization and Efficiency
Utilization is the percent of design
capacity actually achieved (two ways)
Utilization = Actual output/Design capacity
Utilization = Demand rate/Service rateNo.of Servers
Efficiency is the percent of effective
capacity actually achieved

Efficiency = Actual output/Effective capacity

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 Few implications of utilization

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Copyright © 2017 Pearson Education, Inc. S7 - 14
▶ It is not unusual for managers to focus
exclusively on efficiency, but in many
instances this emphasis can be
misleading. This happens when effective
capacity is low compared to design
capacity. In those cases, high efficiency
would seem to indicate effective use of
resources when it does not. The following
example illustrates this point.

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Example – Efficiency and Utilization

▶ Design Capacity = 50 trucks per day

▶ Effective Capacity = 40 trucks per day
▶ Actual Output = 36 trucks per day
actual output 36
Efficiency    90%
effective capacity 40

actual output 36
Utilization    72%
design capacity 50

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 Insights
▶ Compared to the effective capacity of 40 units per day, 36 units per day looks
pretty good. However, compared to the design capacity of 50 units per day, 36
units per day is much less impressive although probably more meaningful.
▶ Because effective capacity acts as a lid on actual output, the real key to
improving capacity utilization is to increase effective capacity by correcting
quality problems, maintaining equipment in good operating condition, fully
training employees, and fully utilizing bottleneck equipment.
▶ Hence, increasing utilization depends on being able to increase effective
capacity, and this requires a knowledge of what is constraining effective capacity.
▶ It is important to recognize that the benefits of high utilization are realized only in
instances where there is demand for the output. When demand is not there,
focusing exclusively on utilization can be counterproductive, because the excess
output not only results in additional variable costs but also generates the costs of
having to carry the output as inventory. Another disadvantage of high utilization
is that operating costs may increase because of increasing waiting time due to
bottleneck conditions.

Copyright © 2017 Pearson Education, Inc. S7 - 17

 Design
Bakery Example Capacity
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 1,200 rolls per hour
Bakery operates 7 days/week, three - 8 hours shifts/day

Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

Copyright © 2017 Pearson Education, Inc. S7 - 18

Bakery Example Utilization

Actual production last week = 148,000 rolls

Effective capacity = 175,000 rolls
Design capacity = 1,200 rolls per hour
Bakery operates 7 days/week, three - 8 hours shifts/day

Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

Utilization = 148,000/201,600 = 73.4%

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Bakery Example Efficiency

Actual production last week = 148,000 rolls

Effective capacity = 175,000 rolls
Design capacity = 1,200 rolls per hour
Bakery operates 7 days/week, three - 8 hours shifts/day

Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

Utilization = 148,000/201,600 = 73.4%

Efficiency = 148,000/175,000 = 84.6%

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EXPANDING CAPACITY

The manager of Sara James Bakery now needs to increase

production of the increasingly popular Deluxe roll. To meet this
demand, she will be adding a second production line. The second
line has the same design capacity (201,600) and effective
capacity (175,000) as the first line; however, new workers will be
operating the second line. Quality problems and other
inefficiencies stemming from the inexperienced workers are
expected to reduce output on the second line to 130,000
(compared to 148,000 on the first). The utilization and efficiency
were 73.4% and 84.6%, respectively, on the first line.
Determine the new utilization and efficiency for the Deluxe roll
operation after adding the second line.

Copyright © 2017 Pearson Education, Inc. S7 - 21

 Design
Bakery Example Capacity
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 201,600 rolls per line
Efficiency = 84.6%
Expected output of new line = 130,000 rolls

Design capacity = 201,600 x 2 = 403,200 rolls

Copyright © 2017 Pearson Education, Inc. S7 - 22

 Effective
Bakery Example Capacity
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 201,600 rolls per line
Efficiency = 84.6%
Expected output of new line = 130,000 rolls

Design capacity = 201,600 x 2 = 403,200 rolls

Effective capacity = 175,000 x 2 = 350,000 rolls

Copyright © 2017 Pearson Education, Inc. S7 - 23

 Actual
Bakery Example Output
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 201,600 rolls per line
Efficiency = 84.6%
Expected output of new line = 130,000 rolls

Design capacity = 201,600 x 2 = 403,200 rolls

Effective capacity = 175,000 x 2 = 350,000 rolls
Actual output = 148,000 + 130,000 = 278,000 rolls

Copyright © 2017 Pearson Education, Inc. S7 - 24

 Utilization
Bakery Example Efficiency
Actual production last week = 148,000
Although addingrollsequipment increases capacity, that
equipment may not be operated as efficiently with new
Effective capacity = 175,000 rolls
employees as might be the case with experienced
employees. For Sara James Bakery, a doubling of
Design capacity = 201,600 rolls per line
equipment investment did not result in a doubling of
output; other variables drove both utilization and
Efficiency = 84.6% efficiency lower.

Expected output of new line = 130,000 rolls

Design capacity = 201,600 x 2 = 403,200 rolls

Effective capacity = 175,000 x 2 = 350,000 rolls
Actual output = 148,000 + 130,000 = 278,000 rolls
Utilization = 278,000/403,200 = 68.95%
Efficiency = 278,000/350,000 = 79.43%

Copyright © 2017 Pearson Education, Inc. S7 - 25

 Utilization Another Example
a. Suppose that an inspection station for
assembled printers receives 40 printers/hour
and has two inspectors, each of whom can
inspect 30 printers per hour. What is the
utilization of the inspection station?
b. Suppose that the demand is estimated to be
100 printers per hour. What is the utilization if
three, four, or five inspectors are available?
c. If the demand for printer inspections is 150
printers per hour, how many inspectors would
be needed to achieve a utilization of at least 80
percent?
Copyright © 2017 Pearson Education, Inc. S7 - 26
▶ Sol. a) We know
Utilization = Demand rate/Service rateNo.of Servers

(Note: because service rate > demand rate, so they will sit
idle one-third of time)
b) Utilization with three, four, five inspectors

(Note: with three

inspectors, utilization
exceeds 100%,
therefore, the work
would eventually pile
up because demand
rate > service rate)

Copyright © 2017 Pearson Education, Inc. S7 - 27

▶ c)

Implies . So, round it to 6.

Copyright © 2017 Pearson Education, Inc. S7 - 28

 Capacity Considerations –
Good Capacity Decisions
1. Forecast demand accurately
2. Match technology increments and sales volume: Capacity
options are often constrained by technology. Some capacity
increments may be large (e.g., steel mills or power plants),
while others may be small (hand-crafted Louis Vuitton
handbags). Large capacity increments complicate the
difficult but necessary job of matching capacity to sales.
3. Find the optimum operating size
(volume): Economies and diseconomies of scale
4. Build for change: Managers build flexibility into facilities and
equipment; changes will occur in processes, as well as
products, product volume, and product mix.

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 Optimal Operating Level
Average cost per unit

Minimum
cost

Optimal Rate of output

Output
rate

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Economies and Diseconomies of Scale

▶ Economies of scale
▶ If output rate is less than the optimal level,
increasing the output rate results in
decreasing average per unit costs
▶ Diseconomies of scale
▶ If the output rate is more than the optimal
level, increasing the output rate results in
increasing average per unit costs

Copyright © 2017 Pearson Education, Inc. S7 - 31

 Example
▶ Krispy Kreme originally had 8,000-square-
foot stores but found them too large and
too expensive for many markets. Then
they tried tiny 1,300-squarefoot stores,
which required less investment, but such
stores were too small to provide the
mystique of seeing and smelling Krispy
Kreme doughnuts being made. Krispy
Kreme finally got it right with a 2,600-foot-
store.
Copyright © 2017 Pearson Education, Inc. S7 - 32
 Economies and Diseconomies of
Scale
Figure S7.2
(sales per square foot)
Average unit cost

1,300 sq ft 8,000 sq ft
store 2,600 sq ft store
store

Economies Diseconomies
of scale of scale
1,300 2,600 8,000
Number of square feet in store
Copyright © 2017 Pearson Education, Inc. S7 - 33
 Real life example from our research

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 Managing Demand
► Demand exceeds capacity
► Curtail demand by raising prices, scheduling
longer lead times
► Long-term solution is to increase capacity
► Capacity exceeds demand
► Stimulate market
► Product changes
► Adjusting to seasonal demands
► Produce products with complementary
demand patterns

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 Complementary Demand
Patterns
Combining the
two demand
patterns reduces
the variation
4,000 –
Sales in units

Snowmobile
3,000 – motor sales

2,000 –
Jet ski
1,000 – engine
sales

JFMAMJJASONDJFMAMJJASONDJ
Time (months)

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 Tactics for Matching Capacity
to Demand
1. Making staffing changes
2. Adjusting equipment
► Purchasing additional machinery
► Selling or leasing out existing equipment
3. Improving processes to increase throughput
4. Redesigning products to facilitate more throughput
5. Adding process flexibility to meet changing product
preferences
6. Closing facilities

Copyright © 2017 Pearson Education, Inc. S7 - 37

 Service-Sector Demand
and Capacity Management
► Demand management
► Appointment, reservations, FCFS rule
► Capacity
management
► Full time,
temporary,
part-time
staff

Copyright © 2017 Pearson Education, Inc. S7 - 38

 Bottleneck analysis and the Little’s Law

As manager seek to match capacity to demand, decisions must be made,

about the size of specific operations or work areas in the larger system.
Each of the interdependent work areas can be expected to have its own
capacity.

Bottleneck – the bottleneck is an operation that is the limiting factor or the

constraint. It has the lowest effective capacity, or technically speaking, the
machine/workstation, which takes maximum time to do a job/task is
termed as bottleneck.

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 Bottleneck Operation
▶ An operation in a
sequence of
operations whose
capacity is lower
than that of the
other operations

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▶ Process time – time to produce a unit at a workstation

▶ Bottleneck time– the process time of the slowest

workstation/process/machine (or maximum time taken by a workstation)
in the production system. In an assembly line, it is considered for the
entire system not a single workstation or process. Thus, in a parallel
assembly line, the approach to find bottleneck is bit different and
discussed in later slides.

▶ Cycle time – time required to produce a unit/service or time between two

successive unit/service.

▶ Flow time – which measures the time each job spends waiting plus
being processed. For example, if Job B waits 6 days for Job A to be
processed and then takes 2 more days of operation time itself, its flow
Copyright © 2017 Pearson Education, Inc. S7 - 41
time would be 6+2=8 days
▶ Little’s Law – average inventory (I) in a
process is equal to the flow rate (T) (also
called throughput) multiplied by the flow time
(F).

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 A B C

2 min/unit 4 min/unit 3 min/unit

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In previous example, slowest station is Station B;
thus, it is a bottleneck as it is reducing the time to
produce a unit. So, bottleneck time is 4 mins, which is
also the cycle time.
So, capacity of the system (flow rate, T) in an hour =
60/4 = 15 units/hour
flow time (F) = 9 minutes
So, T = 15 units/hour; F = 9 minutes (on an average a
unit stays in the system); hence;

Copyright © 2017 Pearson Education, Inc. S7 - 44

 Q. A fast-food restaurant has enough space to sit 25 customers
at the same time. Suppose a customer spends on an average 10
minutes in the restaurant; how many customers can serve at
most during a rush hour?

Sol. Using Little’s Law;

F = 10 minutes = 1/6 hour, and I = 25 customers

T = 25 6 = 150 customers/hour

Copyright © 2017 Pearson Education, Inc. S7 - 45

 Q. Suppose that a voting facility processes an average of 50
people per hour and that, on average, it takes 10 minutes for
each person to complete the voting process. How many voters,
on average, are voting?
a) 6.33
b) 7.33
c) 5
d) 8.33
Sol. Using Little’s Law;
F = 10 minutes = 1/6-hour, T = 50 people/hour
I = 8.33 voters
Therefore, on average, we would expect to find about eight or
nine voters inside the facility.
Copyright © 2017 Pearson Education, Inc. S7 - 46
 Q. Suppose that the loan department of a bank takes an average
of six days to process an application and that an internal audit
found that about 100 applications are in various stages of
processing at any one time. What is the throughput (in
applications per month)?
a) 16.67
b) 500
c) 200
d) 100
Sol. Using Little’s Law;
F = 6 days = 6/30 =0.2 months, I = 100 applications
T = 100/0.2 = 500 applications/month

Copyright © 2017 Pearson Education, Inc. S7 - 47

 Capacity Analysis
► Two identical sandwich lines
► Lines have two workers and three operations
► All completed sandwiches are wrapped
First assembly line

Bread Fill Toaster

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich
Wrap/
Order
Deliver
30 sec/sandwich
Bread Fill Toaster 37.5 sec/sandwich

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich

Second assembly line

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 Capacity Bread
15 sec
Fill
20 sec
Toaster
40 sec

Analysis
Order Wrap
30 sec
Bread Fill Toaster 37.5 sec
15 sec 20 sec 40 sec

► The two lines are identical, so parallel

processing can occur
► At 40 seconds, the toaster has the longest
processing time and is the bottleneck for
each line
► At 40 seconds for two sandwiches, the
bottleneck time of the combined lines = 20
seconds
► At 37.5 seconds, wrapping and delivery is
the bottleneck for the entire operation
Copyright © 2017 Pearson Education, Inc. S7 - 49
 Capacity Bread
15 sec
Fill
20 sec
Toaster
40 sec

Analysis
Order Wrap
30 sec Bread Fill Toaster 37.5 sec
15 sec 20 sec 40 sec

► Capacity per hour is 3,600 seconds/37.5

seconds/sandwich = 96 sandwiches per
hour

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 Capacity Analysis
► Standard process for cleaning teeth
► Cleaning and examining X-rays can happen
simultaneously

Hygienist
cleaning

Takes Develops 24 min/unit Check

Check in Dentist
X-ray X-ray out

2 min/unit 2 min/unit 4 min/unit X-ray 8 min/unit 6 min/unit

exam

5 min/unit

Copyright © 2017 Pearson Education, Inc. S7 - 51

 Capacity Check
in
Takes
X-ray
Develops
X-ray
Hygienist
cleaning

24 min/unit
Dentist
Check
out

Analysis 2 min/unit 2 min/unit 4 min/unit X-ray

exam

5 min/unit
8 min/unit 6 min/unit

► All possible paths must be compared

► Bottleneck is the hygienist at 24 minutes
► Hourly capacity is 60/24 = 2.5 patients

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 Practice problems

1. T. Smunt Manufacturing Corp. has the process

displayed below. The drilling operation occurs
separately from and simultaneously with the sawing
and sanding operations. The product only needs to go
through one of the three assembly operations (the
assembly operations are parallel.
Assembly
Sawing Sanding 78 min/unit
15 min/unit 15 min/unit
Welding Assembly
8 min/unit
25 min/unit 78 min/unit

Drilling Assembly
27 min/unit 78 min/unit

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 a) Which operation is the bottleneck? (hint: use same logic as discussed in previous
slides - drilling)

b) If the firm operates 8 hours per day, 22 days per month, what is the
monthly capacity of the manufacturing process? (391.11 units/month)
c) Suppose that a second drilling machine is added, and it takes the same
time as the original drilling machine, what is the new bottleneck time
and the throughput time of the system? (26mins, 133 mins)

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 Break-Even Analysis
► Technique for evaluating process and
equipment alternatives
► Objective is to find the point in dollars
and units at which cost equals
revenue
► Requires estimation of fixed costs,
variable costs, and revenue

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 Break-Even Analysis
► Fixed costs are costs that continue even
if no units are produced
► Depreciation, taxes, debt, mortgage
payments
► Variable costs are costs that vary with
the volume of units produced
► Labor, materials, portion of utilities
► Contribution is the difference between
selling price and variable cost

Copyright © 2017 Pearson Education, Inc. S7 - 56

 Break-Even Analysis
– Total revenue line
900 –

800 – i dor
Break-even point rr Total cost line
t co
700 –
Total cost = Total revenue
rofi
P
Cost in dollars

600 –

500 –
Variable cost
400 –

300 –
oss or
200 – L rid
r
co
100 – Fixed cost
| | | | | | | | | | | |
0 100 200 300 400 500 600 700 800 900 1000 1100
Volume (units per period)
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 Break-Even Analysis
Assumptions
► Costs and revenue are linear

functions
► Generally, not the case in the real
world
► We actually know these costs
► Very difficult to verify
► Time value of money is often
ignored
Copyright © 2017 Pearson Education, Inc. S7 - 58
 Break-Even Analysis
BEPx = x = number
break-even point of units produced
in units TR = total
BEP$ = revenue = Px
break-even point F = fixed
in dollars costs
P = V = variable
pricepoint
Break-even occurs when cost per unit
per unit
(after all TC = total
discounts) costs = F + Vx
TR = TC F
or BEP x =
P–V
Px = F + Vx

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 Break-Even Analysis
BEPx = x = number
break-even point of units produced
in units TR = total
BEP$ = revenue = Px
break-even point F = fixed
in dollars costs
P = V = variable
priceP per F Profit
unit = TRcost
- TCper unit
BEP$ = BEP = P
(after all P – V
x

discounts) – (F + =Vx)
= Px TC total
F costs = F + Vx
= (P – V)/P = Px – F – Vx
= (P - V)x – F
F
= 1 – V/P
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 Break-Even Example
Fixed costs = $10,000 Material = $.75/unit
Direct labor = $1.50/unit Selling price = $4.00 per unit

F $10,000
BEP$ = =
1 – (V/P) 1 – [(1.50 + .75)/(4.00)]
$10,000
= = $22,857.14
.4375

Copyright © 2017 Pearson Education, Inc. S7 - 61

 Break-Even Example
Fixed costs = $10,000 Material = $.75/unit
Direct labor = $1.50/unit Selling price = $4.00 per unit

F $10,000
BEP$ = =
1 – (V/P) 1 – [(1.50 + .75)/(4.00)]
$10,000
= = $22,857.14
.4375

F $10,000
BEPx = = = 5,714
P–V 4.00 – (1.50 + .75)

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 Break-Even Example
50,000 –
Revenue
40,000 –
Break-even
point Total
costs
Dollars

30,000 –

20,000 –
Fixed costs
10,000 –

| | | | | |
0 2,000 4,000 6,000 8,000 10,000
Units

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 BEP for Multiproduct Case
Most firms from manufacturers to restaurants, have a
variety of offerings. Each offering may have a different
selling price and variable cost. Utilizing BEP, we modify
previous equation to reflect the proportion of sales for
each product. We do this by “weighting” each product’s
contribution by its proportion sales. The formula is then,

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 Break-Even Example
Multiproduct Case

Break-even
point in dollars
(BEP$)

where V = variable cost per unit

P = price per unit
F = fixed costs
W = percent each product is of total dollar sales
expressed as a decimal
i = each product
Copyright © 2017 Pearson Education, Inc. S7 - 65
 Assume fixed cost of $3000/month; find the BEP for the company

ITEM Annual forecasted sales Price (dollars) Cost (dollars)

units
Sandwich 9000 5.00 3.00
Drinks 9000 1.50 0.50
Baked Potato 7000 2.00 1.00

Multiproduct break-even: determining contribution

1 2 3 4 5 6 7 8 9
ITEM Annual Price Cost (/) Contribution Annual % of sales Weighted
forecasted (dollars) () (dollars) (1-(/)) forecasted () (col. contributio
sales units sales ($) 7/total) n (col.6 x
(col. 2 X col.8)
col. 3)

Sandwich 9000 5.00 3.00 0.60 0.40 45000 0.621 0.248

Drinks 9000 1.50 0.50 0.33 0.67 13500 0.186 0.125
Baked 7000 2.00 1.00 0.50 0.50 14000 0.193 0.097
Potato

$72,000 1.000 0.470

Copyright © 2017 Pearson Education, Inc. S7 - 66

 (in dollars) =

The information given above implies total daily sales (52

weeks at 6 days each)

This means, the café now knows that it must generate average
sales of $245.50 each day to break-even. Management also
knows that if forecasted sales of $72,500 are correct, will lose
money, as break even is $76,596

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