Chapter 14, Problem 57P

Ozark Industries manufactures and sells three products, which are manufactured in a factory with four departments. Both labor and machine time are applied to the products as they pass through each department. The machines and labor skills required in each department are so specialized that neither machines nor labor can be switched from one department to another.

Ozark Industries’ management is planning its production schedule for the next few months. The planning is complicated, because there are labor shortages in the community and some machines will be down several months for repairs.

Management has assembled the following information regarding available machine and labor time by department and the machine hours and direct-labor hours required per unit of product. These data should be valid for the next six months.

Inventory levels are satisfactory and need not be increased or decreased during the next six months. Unit price and cost data that will be valid for the next six months are as follows:

Required:

1. 1. Calculate the monthly requirement for machine hours and direct-labor hours for the production of products M07, T28, and B19 to determine whether the monthly sales demand for the three products can be met by the factory.
2. 2. What monthly production schedule should Ozark Industries select in order to maximize its dollar profits? Explain how you selected this production schedule, and present a schedule of the contribution to profit that would be generated by your production schedule.
3. 3. Identify the alternatives Ozark Industries might consider so it can supply its customers with all the product they demand.