The senior management team wants to improve the profitability of the firm by accepting the right set of orders. Currently, decisions are made using the traditional method, which is to accept as much of the product with the highest contribution margin as possible (up to the limit of its demand), followed by the next highest contribution product, and so on until all available capacity is utilized. Because the firm cannot satisfy all the demand, the product mix must be chosen carefully. Jay Perry, the newly promoted production supervisor, is knowledgeable about the theory of constraints and the bottleneck-based method for scheduling. He believes that profitability can indeed be improved if bottleneck resources are exploited to determine the product mix. What is the change in profits if, instead of the traditional method that YPI has used thus far, the bottleneck method advocated by Jay is used for selecting the product mix? What is the profit if the traditional method is used for determining YPI's product mix? (Note: When determining the product mix, if the number of units to produce is not a whole number, be sure to round down to the next whole number before proceeding with any profit calculations.) The profit using the traditional method is $ (Enter your response rounded to the nearest whole number.) York-Perry Industries (YPI) manufactures a mix of affordable guitars (A, B, C) that are fabricated and assembled at four different processing stations (W, X, Y, Z). The operation is a batch process with small setup times that can be considered negligible. The product information (price, weekly demand, and processing times) and process sequences are shown below. Purchased parts and raw materials (shown as a per-unit consumption rate) are represented by inverted triangles. YPI is able to make and sell up to the limit of its demand per week with no penalties incurred for not meeting the full demand. Each workstation is staffed by one highly skilled worker who is dedicated to work on that workstation alone and is paid $13 per hour. The plant operates one 8-hour shift per day and operates on a 5-day work week (i.e., 40 hours of production per person per week). Overhead costs are $9,000/week. Product A $9 Step 1 Station W (11 min) Step 2 Station Z (10 min) Q Q Step 3 Station X (9 min) Product: A Price: $100/unit Demand: 58 units/wk $4 Raw materials Purchased part Product B $6 Step 1 Step 2 Station W Station Y Step 3 Station Z (8 min) (12 min) (11 min) Product: B Price: $90/unit Demand: 110 units/wk Raw materials Purchased part $4 Product C $11 Step 1 Station X Step 2 Station W Step 3 Station Y Raw materials (8 min) (17 min) (5 min) Product: C Price: $105/unit Demand: 58 units/wk Purchased nart $4 a

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
icon
Related questions
Question
Help please
The senior management team wants to improve the profitability of the firm by accepting the right set of orders. Currently, decisions are made using the
traditional method, which is to accept as much of the product with the highest contribution margin as possible (up to the limit of its demand), followed by the next
highest contribution product, and so on until all available capacity is utilized. Because the firm cannot satisfy all the demand, the product mix must be chosen
carefully. Jay Perry, the newly promoted production supervisor, is knowledgeable about the theory of constraints and the bottleneck-based method for scheduling.
He believes that profitability can indeed be improved if bottleneck resources are exploited to determine the product mix.
What is the change in profits if, instead of the traditional method that YPI has used thus far, the bottleneck method advocated by Jay is used for selecting the
product mix?
What is the profit if the traditional method is used for determining YPI's product mix? (Note: When determining the product mix, if the number of units to produce is
not a whole number, be sure to round down to the next whole number before proceeding with any profit calculations.)
The profit using the traditional method is $
(Enter your response rounded to the nearest whole number.)
Transcribed Image Text:The senior management team wants to improve the profitability of the firm by accepting the right set of orders. Currently, decisions are made using the traditional method, which is to accept as much of the product with the highest contribution margin as possible (up to the limit of its demand), followed by the next highest contribution product, and so on until all available capacity is utilized. Because the firm cannot satisfy all the demand, the product mix must be chosen carefully. Jay Perry, the newly promoted production supervisor, is knowledgeable about the theory of constraints and the bottleneck-based method for scheduling. He believes that profitability can indeed be improved if bottleneck resources are exploited to determine the product mix. What is the change in profits if, instead of the traditional method that YPI has used thus far, the bottleneck method advocated by Jay is used for selecting the product mix? What is the profit if the traditional method is used for determining YPI's product mix? (Note: When determining the product mix, if the number of units to produce is not a whole number, be sure to round down to the next whole number before proceeding with any profit calculations.) The profit using the traditional method is $ (Enter your response rounded to the nearest whole number.)
York-Perry Industries (YPI) manufactures a mix of affordable guitars (A, B, C) that are fabricated and assembled at four different processing stations (W, X, Y, Z).
The operation is a batch process with small setup times that can be considered negligible. The product information (price, weekly demand, and processing times)
and process sequences are shown below. Purchased parts and raw materials (shown as a per-unit consumption rate) are represented by inverted triangles. YPI is
able to make and sell up to the limit of its demand per week with no penalties incurred for not meeting the full demand. Each workstation is staffed by one highly
skilled worker who is dedicated to work on that workstation alone and is paid $13 per hour. The plant operates one 8-hour shift per day and operates on a 5-day
work week (i.e., 40 hours of production per person per week). Overhead costs are $9,000/week.
Product A
$9
Step 1
Station W
(11 min)
Step 2
Station Z
(10 min)
Q
Q
Step 3
Station X
(9 min)
Product: A
Price: $100/unit
Demand: 58 units/wk
$4
Raw materials
Purchased part
Product B
$6
Step 1
Step 2
Station W
Station Y
Step 3
Station Z
(8 min)
(12 min)
(11 min)
Product: B
Price: $90/unit
Demand: 110 units/wk
Raw materials
Purchased part
$4
Product C
$11
Step 1
Station X
Step 2
Station W
Step 3
Station Y
Raw materials
(8 min)
(17 min)
(5 min)
Product: C
Price: $105/unit
Demand: 58 units/wk
Purchased nart
$4
a
Transcribed Image Text:York-Perry Industries (YPI) manufactures a mix of affordable guitars (A, B, C) that are fabricated and assembled at four different processing stations (W, X, Y, Z). The operation is a batch process with small setup times that can be considered negligible. The product information (price, weekly demand, and processing times) and process sequences are shown below. Purchased parts and raw materials (shown as a per-unit consumption rate) are represented by inverted triangles. YPI is able to make and sell up to the limit of its demand per week with no penalties incurred for not meeting the full demand. Each workstation is staffed by one highly skilled worker who is dedicated to work on that workstation alone and is paid $13 per hour. The plant operates one 8-hour shift per day and operates on a 5-day work week (i.e., 40 hours of production per person per week). Overhead costs are $9,000/week. Product A $9 Step 1 Station W (11 min) Step 2 Station Z (10 min) Q Q Step 3 Station X (9 min) Product: A Price: $100/unit Demand: 58 units/wk $4 Raw materials Purchased part Product B $6 Step 1 Step 2 Station W Station Y Step 3 Station Z (8 min) (12 min) (11 min) Product: B Price: $90/unit Demand: 110 units/wk Raw materials Purchased part $4 Product C $11 Step 1 Station X Step 2 Station W Step 3 Station Y Raw materials (8 min) (17 min) (5 min) Product: C Price: $105/unit Demand: 58 units/wk Purchased nart $4 a
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Practical Management Science
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Business in Action
Business in Action
Operations Management
ISBN:
9780135198100
Author:
BOVEE
Publisher:
PEARSON CO
Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.