\"Shelby Shelving is a small company that manufactures two types of shelves for

Question

"Shelby Shelving is a small company that manufactures two types of shelves for grocery stores. Model S is the standard model; model LX is a heavy-duty version. Shelves are manufactured in three major steps: stamping, forming, and assembly. In the stamping stage, a large machine is used to stamp (i.e., cut) standard sheets of metal into appropriate sizes. In the forming stage, another machine bends the metal into shape. Assembly involves joining the parts with a combination of soldering and riveting. Shelby’s stamping and forming machines work on both models of shelves. Separate assembly departments are used for the final stage of production. The file Shelby Shelving.xlsx contains relevant data for Shelby. (See attached Excel workbook) The hours required on each machine for each unit of product are shown in the range B5:C6 of the Accounting Data sheet. For example, the production of one model S shelf requires 0.25 hour on the forming machine. Both the stamping and forming machines can operate for 800 hours each month. The model S assembly department has a monthly capacity of 1900 units. The model LX assembly department has a monthly capacity of only 1400 units. Currently Shelby is producing and selling 400 units of model S and 1400 units of model LX per month. Model S shelves are sold for $1800, and model LX shelves are sold for $2100. Shelby’s operation is fairly small in the industry, and management at Shelby believes it cannot raise prices beyond these levels because of the competition. However, the marketing department believes that Shelby can sell as much as it can produce at these prices"

The scenario described in Case 13.1 is essentially a cost maximization problem.

True

False

QUESTION 2

[2] The profit function in this problem is: 1800x + 2100y where x and y denote output for Model LX and Model S respectively.

True

False

QUESTION 3

[3] Fixed costs in cell G5:G8 are large because each of these costs is a function of output produced.

True

False

QUESTION 4

[4] Given the resurce constraints provided in this problem it is economically possible for the business to produce at full capacity.

True

False

Figure 13.33 Data for Shelby Case Shelby Sheing Data for Current Production Schedule unit cverhead cost data Model S Mode X ariades Variable LX $125,000 $95,000 80,000 $85,000 6 Forming 120 $165 170 Model SAssembly Model LX Asse Model SI Mode 9 Current monthy 1400 costs of the shelves- based on the current production levels Hoursspent in Mode Model LX Model S Mode X Totals materisls 3 Stamping 120 420 Direct labar $35 35 $90 100 tamping 6 Percentages o time spent in depar tments Assembiy otal direct lsbo Model S Mode X 175 210 Stamping 22.2% 87-5% 49 $229 $246 $635 2,045 20 21 Unitselling price $1,800 $2,100 Assembly ota overhead otal cost 365 664 1839 23 1900 1400

Explanation / Answer

QUESTION 2

[2] The profit function in this problem is: 1800x + 2100y where x and y denote output for Model LX and Model S respectively.

False

QUESTION 3

[3] Fixed costs in cell G5:G8 are large because each of these costs is a function of output produced.

True

QUESTION 4

[4] Given the resurce constraints provided in this problem it is economically possible for the business to produce at full capacity.

True

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