Atlas Inc. is a toy bicycle manufacturing company producing a five-inch small ve

Question

Atlas Inc. is a toy bicycle manufacturing company producing a five-inch small version of the bike that Lance Armstrong rode to win his first Tour de France. The assemblyline at Atlas Inc. consists of seven work stations, each performing a single step. Stations and processing times are summarized here Step 1 (30 sec.): The plastic tube for the frame is cut to size Step 2 (20 sec.): The tube is put together. Step 3 (30 sec.): The frame is glued together Step 4 (30 sec.): The frame is cleaned Step 5 (25 sec.): Paint is sprayed onto the frame Step 6 (45 sec.): Wheels are assembled Step 7 (40 sec.): All other parts are assembled to the frame Under the current process layout, workers are allocated to the stations as shown here Worker 1: Steps 1, 2 Worker 2: Steps 3,4 Worker 3: Step 5 Worker 4: Step 6 Worker 5: Step 7 Assume the workers are paid $20 per hour. Each bicycle is sold for $5 and includes parts that are sourced for $1.25. The company has fixed costs of $175 per hour. Despite Lance Armstrong's doping confession, there exists substantially more demand for the bicycle than Atlas can supply. Instructions: Carry at least 4 decimal places in all intermediate calculations and values. Round (only) your final answers to 2 decimal places. Negative amounts should be indicated by a minus sign What is the cost of direct labor for the bicycle? per unit How much profit does the company make per hour? per hour

Explanation / Answer

a.

Flow time of worker 1 = 30+20 = 50 sec

Flow time of worker 2 = 30+30 = 60 sec

Flow time of worker 3 = 25 sec

Flow time of worker 4 = 45 sec

Flow time of worker 5 = 40 sec

Flow time of worker 2 is highest. Therefore, it is the bottleneck.

Cycle time = 60 sec

Number of bicycles produced per hour = 36000/60 = 60 units per hour

Cost of direct labor per bicycle = 20*5/60 = $ 1.67 per unit

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b.

Profit per hour = 60*(5 - 1.67 - 1.25) - 175 = $ - 50 per hour

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c.

If parts were sourced 9% cheaper, then profit per hour = 60*(5 - 1.67 - 1.25*(1-9%)) - 175 = $ - 43.25 per hour

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d.

Profit per hour = 60*(5 - 1.67 - 1.25) - 157.5 = $ -32.5 per hour

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e.

Cycle time = 60-5 = 55 sec per unit

Cycles produced per hour = 3600/55 = 65.45 per hour

Cost of direct labor per hour = 5 workers * $ 20 per hour = $ 100

Profit per hour = 65.45*(5-1.25)-100-175 = $ -29.56 per hour

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