Canine Kennels Company (CKC) manufactures two different types of dog chew tays (
ID: 389715 • Letter: C
Question
Canine Kennels Company (CKC) manufactures two different types of dog chew tays (A and B, sold in 1,000-count baxes) that are manufactured and assembled on three diftferent workstations (W X, and Y)using a smal-batch process (see the figure below). Batch setup times are neg gible. The flowchart denotes the path cach product follows through the manufacturing process, and each products price, demand per weck, and processing times per unit are incicated as well Purchased parts and raw materials consumed during production are represented by inverted triangles CKC can make end se up to the limit of rs demand per weok no penalties are incurred for not being able to meat all the demand. Each workstation is stafed by a worker who is dedicated to work on that workstetion alone and is peid 58 per hour. Total labor cosrs per week are fxed. Variable overhead costs are S3,500week. The plant operates one 8hour shift per day, or 40 houre/week. Step 1 Station W Step 2 StationX Step 3 StationY Product: A Price: S60Vunit Damand: 80 unitswk $3 (11 min) (10 min) 14 min Raw materials Purchased Step 1 Station X (20 min) Step 2 Station W (12 min Step 3 StationY (11 min) Product B Price: S70Vunit Demand: 85 units/wk 57 Raw materials The Benior manage ne t is concerned with the exi ng capacity limitation, 80 they ant to accept the mix o 0 dere at ma mi es the compan 8 pro R Tra dit ona y K has utlized a method hereby decisions amade to oduce a8 much of the product w th highest tribution margin as possible upto linnit o its demand folowed by the next highest contribution produc and so on until no more capacity available. Because capacity imited choosing the proper product max crucial. Troy Hendnx the new y hired production superv or an and o ero the theory of constraints phlosophy and the bottieneck method for scheduling He beieves that profitabilty can indeed be impraved f bottlereck resources are exploced bo determine the product mix. a. What is the protit if the tradtional contribution margin method is used for determining CKCs product mix? The proft with the traditional approach is Enter your response rounded to the nearest whole number)Explanation / Answer
Step 1:
Number of workers per workstation =1
# of workstations = 3
Available time per workstation per week = 40 hours x 60 minutes = 2400 minutes
Workstation
Processing time per Product A (mins)
Processing time per Product B (mins)
W
11
12
X
10
20
Y
14
11
Demand (units/week)
80
85
Step 2:
Determining Aggregate Workload for each WS:
Workload per product = demand x time per unit
Workstation
Load from Product A
Load from Product B
Aggregate Workload
W
80*11
= 880
1020
1900
X
800
1700
2500
Y
1120
935
2055
Aggregate workload of the WS-X is more than the available time of WS-X, the bottleneck WS is X.
Step 3:
Determine Contribution Margin per unit per product:
Product
D
SD
Price
$60
$70
Raw Materials
$3
$7
Purchased Parts
$3
$6
Total material Cost
$6
$13
Contribution margin
$54
$57
Step4: Product Mix according to Traditional Method:
Select the best product mix according to the highest overall contribution margin of each product.
Since CM of item B is more than A, the order of production schedule is B – A
Product Mix:
First determine minutes remaining at all WS after producing 85 units of item B. Since WS-X is bottleneck process, determine units of item A can be produced with remaining time available on WS-X.
Time available on WS-X = 700 units
Unit processing of item A on WS-X = 10 mins
Units of Item A to be produced on WS-X = 700 mins/10 mins/unit = 70 units
Workstation
Minutes available at the start
Minutes left after making 85 units of B
Minutes left after making 70 A
W
2400
1380
610
X
2400
700
0
Y
2400
1465
485
Production mix: A = 70 units and B = 80 units
Step 5: Determine total profit:
Product
A
B
Total
Contribution margin/unit
$54
$57
Production units
70
85
Total Contribution margin
3780
4845
$8,625
Wages
3 workers x 40 hours x $8/hour
($960)
OH cost
($3,500)
Total profit
$4,165
Total profit by traditional contribution margin method - $4,165
Workstation
Processing time per Product A (mins)
Processing time per Product B (mins)
W
11
12
X
10
20
Y
14
11
Demand (units/week)
80
85
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.