a.
What steps can be taken to loosen the constraint in coating and sharpening?
b.
Consider Model C210 and Model D400 chisels. Which product should be emphasized if the
constraint in coating and sharpening cannot be loosened?
c.
Focusing only on the Model C210 chisel and the model D400 chisel what would be the benefit to
the firm of gaining one more hour of production time in coating and sharpening?
d.
In coating and sharpening, the operator begins by inspecting items that have arrived from the
chemical bath. If rough edges or blemishes are detected the operator smooths and/or buffs the
items before actual coating or sharpening takes place. (Note that this process is in addition to
the inspection that takes place at a separate inspection station following coating and
sharpening.)
In order to save valuable time in coating and sharpening, management is considering forming a separate
inspection station before the coating and sharpening process. The inspection station can utilize existing
smoothing and buffing equipment, and it can be staffed on an as-needed basis by an employee who
normally works in the chemical bath area, which has excess capacity (so the employee will not be missed
for brief periods.) Management estimates that this action will free up 240 hours in coating and
sharpening ([an average of 5 minutes per hour X 8 hours per day X 360 operating days per year/60]).
Management has calculated that the average contribution margin per year unit for its products is $300.
The average contribution margin per hours spent in coating and sharpening is $850. Based on this
information, estimate the incremental profit per year associated with adding the new inspection station.
Model C210 Chisel
Model D400 Chisel
Selling price
$500
$850
Less variable
costs:
Direct Labor
$85
$180
Direct Material
150
180
Variable
Overhead
_15
_250
_60
_420
Contribution
Margin
250
430
Less allocated
fixed costs
_185
_230
Profit per unit
$65
$200
Time in coating
and sharpening to
produce 1 unit
.2 hours
.8 hours
