Question

PA7-6 Making Decisions Involving Constrained Resource [LO 7-2, 7-7) Blossom, Inc., is a small company that manufactures three versions of patio tables. Unit information for its products follows: Table A $ 53 Sales price Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 11 Table B $ 57 12 4 5 Table C $ 71 13 8 5 Required number of labor hours Required number of machine hours 0.5 4.0 0.5 2.50 1.0 2.0 Blossom has determined that it can sell a limited number of each table in the upcoming year. Expected demand for each model follows: Table A Table B Table C 50,000 units 25,000 units 25,000 units Required: 1. Suppose that direct labor hours has been identified as the bottleneck resource. Determine how Blossom should prioritize production by rank ordering the products from 1 to 3. Ranking Product Table A Table B Table C

Answer 1

Answer : 1) When labour Howa as the bottleneck resources Product with Prochuced 50,00 - 25,000 12.500 Table A sale price $53 Len: Direct Material (ll Direct labour (2) Variable overhead (5) Table B 8 57 1/22 table 7 (13) (8) 3) When the Constrained machine Resources how has. (5) 35 36 36 0.5 0.5 Contribution pou Required labor flom Contribution per Labou how - Rank I I I Table A Table B Table C Contributin por 35 Required machine A 4 Contribution Peri Machine Roma 8.73 14.40 22.50 Rank Table A - Third Tasse B second tablec – firor Arsi Avoilage machine fourt in 245000 allocation as per Ranking Rank Table Required Demand to Tote Balance C 2 25000 1000 198000 B 2.50 9 62.500 132500 3 Y 100 20000 Total 312,500 Available for in only 132,500 for prodret A. Hence Take A Can be produce only 13 250 - 33125 unite A 33125 B - 25000 C - 25,000 H # P HOW! Table A - Second Rank Table B - Firat Rock table c - Third Paule An: 2 Allocation of labour Hora Rank Table Demard Required Hrn Balance Hry 25.000 12,500 37.500 2 A 50.000 25.000 12,500 25.000 25.060 Total 62,500 prochet c has only 12,500 Labour hour fence Product a Can produce only 12500 unit 245one B