OPERATIONS MANAGEMENT
OPERATIONS MANAGEMENT
2nd Edition
ISBN: 9781260238877
Author: CACHON
Publisher: RENT MCG
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Chapter 4, Problem 8PA

a)

Summary Introduction

To determine: The cost of direct labor for the bicycle.

a)

Expert Solution
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Explanation of Solution

Given information:

OPERATIONS MANAGEMENT, Chapter 4, Problem 8PA , additional homework tip  1

Identification of bottleneck:

Worker 1 performs Step 1 and Step 2 with a total time of 50 seconds.

Worker 2 performs Step 3 and Step 4 with a total time of 60 seconds.

Worker 3 performs Step 5 with a time of 50 seconds.

Worker 4 performs Step 6 with a time of 45 seconds.

Worker 5 performs Step 7 with a time of 40 seconds.

Therefore, the bottleneck is Worker 2 with 60 seconds.

Calculation of cost of direct labor for the bicycle:

Cost of direct labor=Number of workers×Wage rateBottleneck time=5×1560=7560=$1.25 per bicycle

The cost of direct labor per bicycle is $1.25.

b)

Summary Introduction

To determine: The profit per hour of the company.

b)

Expert Solution
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Explanation of Solution

Given information:

OPERATIONS MANAGEMENT, Chapter 4, Problem 8PA , additional homework tip  2

Calculation of profit per hour:

The bottleneck time is 60 seconds. Therefore, 60 units are produced every hour. Therefore, the flow rate is 60 units per hour.

Profit=Revenues-Cost=(Flow rate×Selling price)-[(Number of workers×Wage rate)+(Flow rate×Sourcing cost)+Fixed cost]=(60×$6)-[(5×$15)+(60×$1)+$200]=360-[(75+60+200)]=360-335=$25 per hour

The profit per hour is $25.

c)

Summary Introduction

To determine: The profit per hour of the company if the sourcing cost is 10% cheaper.

c)

Expert Solution
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Explanation of Solution

Given information:

OPERATIONS MANAGEMENT, Chapter 4, Problem 8PA , additional homework tip  3

Calculation of profit per hour:

The bottleneck time is 60 seconds. Therefore, 60 units are produced every hour. Therefore, the flow rate is 60 units per hour.

Profit=Revenues-Cost=(Flow rate×Selling price)-[(Number of workers×Wage rate)+(Flow rate×Sourcing cost)+Fixed cost]=(60×$6)-[(5×$15)+(60×$0.90)+$200]=360-[(75+54+200)]=360-329=$31 per hour

The profit per hour is $31.

d)

Summary Introduction

To determine: The profit per hour of the company if the fixed cost is 10% less.

d)

Expert Solution
Check Mark

Explanation of Solution

Given information:

OPERATIONS MANAGEMENT, Chapter 4, Problem 8PA , additional homework tip  4

Calculation of profit per hour:

The bottleneck time is 60 seconds. Therefore, 60 units are produced every hour. Therefore, the flow rate is 60 units per hour.

Profit=Revenues-Cost=(Flow rate×Selling price)-[(Number of workers×Wage rate)+(Flow rate×Sourcing cost)+Fixed cost]=(60×$6)-[(5×$15)+(60×$1)+$180]=360-[(75+60+180)]=360-315=$45 per hour

The profit per hour is $45.

e)

Summary Introduction

To determine: The profit per hour of the company if the bottleneck time is reduced by 5 seconds per unit.

e)

Expert Solution
Check Mark

Explanation of Solution

Given information:

OPERATIONS MANAGEMENT, Chapter 4, Problem 8PA , additional homework tip  5

Calculation of profit per hour:

The bottleneck time is 55 seconds. Therefore, the flow rate is:

Flow rate=60 Minutes×60 SecondsBottleneck time=60×6055=3,60055=65.45 units per hour

Profit=Revenues-Cost=(Flow rate×Selling price)-[(Number of workers×Wage rate)+(Flow rate×Sourcing cost)+Fixed cost]=(65.45×$6)-[(5×$15)+(65.45×$1)+$200]=392.7-[(75+65.45+200)]=392.7-340.45=$52.25 per hour

The profit per hour is $52.25.

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