A company makes four products that have the following characteristics: Product A sells for $75 but needs $40 of materials to produce; Product B sells for $90 but needs $65 of materials to produce; Product C sells for $110 but needs $80 of materials to produce; Product D sells for $135 but needs $105 of materials to produce. The processing requirements for each product on each of the four machines are shown in the table. Work centers W, X, Y, and Z are available for 5 days per week, 1 shift per day (8 hrs.) and have no setup time when switching between products. Market demand is 50 As, 60 Bs, 70 Cs, and 80 Ds per week. In the questions that follow, the traditional method refers to maximizing the contribution margin per unit for each product, and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product. Each worker is paid $15 per hour and is paid for an entire week, regardless of how much the worker is used. Answer the following questions: 1. Which Process is the bottleneck operation? 2. Using the traditional method, answer the following questions:a) In what sequence should products be scheduled for production? b) What is the optimal product mix? c) What is the profit if the company manufactures the optimal product mix (consider variable costs only–overhead is not included in this profit calculation)? 3. Using the bottleneck method, answer the following questions: a) In what sequence should products be scheduled for production? b) What is the optimal product mix? c) What is the profit if the company manufactures the optimal product mix (consider variable costs only–overhead is not included in this profit calculation)? 4. How to manage and fix bottlenecks when discovered in operations?
A company makes four products that have the following characteristics:
Product A sells for $75 but needs $40 of materials to produce; Product B sells for $90 but needs $65 of materials to produce; Product C sells for $110 but needs $80 of materials to produce; Product D sells for $135 but needs $105 of materials to produce. The processing requirements for each product on each of the four machines are shown in the table.
Work centers W, X, Y, and Z are available for 5 days per week, 1 shift per day (8 hrs.) and have no setup time when switching between products. Market demand is 50 As, 60 Bs, 70 Cs, and 80 Ds per week. In the questions that follow, the traditional method refers to maximizing the contribution margin per unit for each product, and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product. Each worker is paid $15 per hour and is paid for an entire week, regardless of how much the worker is used.
Answer the following questions:
1. Which Process is the bottleneck operation? 2. Using the traditional method, answer the following questions:a) In what sequence should products be
b) What is the optimal product mix?
c) What is the profit if the company manufactures the optimal product mix (consider variable costs only–overhead is not included in this profit calculation)?
3. Using the bottleneck method, answer the following questions: a) In what sequence should products be scheduled for production?
b) What is the optimal product mix?
c) What is the profit if the company manufactures the optimal product mix (consider variable costs only–overhead is not included in this profit calculation)?
4. How to manage and fix bottlenecks when discovered in operations?
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