(Please help by showing your work) Heritage Watercraft makes reproductions of cl
ID: 2513341 • Letter: #
Question
(Please help by showing your work)
Heritage Watercraft makes reproductions of classic wooden boats. The bottleneck in the production process is fitting wooden planks to build up the curved sections of the hull. This process requires the attention of the shop’s most experienced craftsman. A total of 2,200 hours is available per year in this bottleneck operation. Data concerning the company’s four products appear below:
No fixed costs could be avoided by modifying how many units are produced of any product or even by dropping any one of the products.
Required:
1a. Calculate the total hours required in the bottleneck operation to satisfy demand for all the products.
1b. Is there sufficient capacity in the bottleneck operation to satisfy demand for all products?
2a. Rank the profitability of each product line for the year based on the profitability index.
2b. What is the optimal production plan for the year?
3. What would be the total contribution margin for the optimal production plan you have proposed?
Adirondack Lake Huron Oysterman Voyageur Unit contribution margin $1,260 $375 $630 $830 Annual demand (units) 60 80 70 120 Hours required in the bottleneck operation per unit 12 5 10 10
Explanation / Answer
Solution 1a:
Solution 1b:
As total number of hours available in bottleneck operation is only 2200 hours, however required hours to meet annual demand is 3020 hours. Therefore sufficent capacity is not available in bottleneck operation to satisfy demand of products.
Solution 2 a:
Solution 2b:
Optimal production plan:
Adirondack = 720 hours, 60 units
Voyageur = 1200 hours, 120 units
Lake Huron = (2200 - 720 - 1200) = 280 hours, 56 units
Solution 3:
Computation of total hours required in the bottleneck opertion Particulars Adirondack Lake Huron Oysterman Voyageur Total Annual demand (units) 60 80 70 120 hours required in bottleneck operation per unit 12 5 10 10 Total hours required to meet annual demand 720 400 700 1200 3020Related Questions
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