Question

Blossom, Inc., is a small company that manufactures three versions of patio tables. Unit information for its products follows: Table A $ 43 Table B $ 47 Table C $ 61 V oo - Sales price Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead w W owo W 1.0 Required number of labor hours Required number of machine hours 0.5 4.0 0.5 2.50 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 30,000 units 20,000 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

Requirement 1 Requirement 2 No of Labour hours available Less : Hours for Table B (30000*0.5) 45000 -15000 Sale Price Less : Direct material Direct labour Variable mafacturing overhead Table A $ 43.00 $ 7.00 $ 1.00 $ 3.00 Table B Table C $ 47.00 $ 61.00 $ 8.00 $ 9.00 $ 3.00 $ 7.00 $ 3.00 $ 3.00 30000 -25000 Less : Hours for Table A (50000*0.5) Hours available for Table C No of units for table c with available 5000 hours : 5000 hours /1 hour per unit 5000 $ 42.00 Contribution (A) Required no of labour hours (B) Contribution per Labour Hour (A/B) $ 32.00 0.5 $ 64.00 $ 33.00 0.5 $ 66.00 5000 units $ 42.00 Ranking Product Table A Table B Table C Product Table A Table B Table C Units produced 50000 30000 5000 III Note: Ranking is Given Based on highest Contribution per Hour Requirement 3 Requirement 4 Table A $ 43.00 $ 7.00 $ 1.00 $ 3.00 Sale Price Less : Direct material Direct labour Variable mafacturing overhead Table B Table C $ 47.00 $ 61.00 $ 8.00 $ 9.00 $ 3.00 $ 7.00 $ 3.00 $ 3.00 No of Machine hours available Less : Hours for Table C (20000*2) 235000 40000 195000 -75000 $ 32.00 $ 42.00 Contribution (A) Required no of Machine hours (B) Contribution per Machine Hour (A/B) $ 33.00 2.5 $ 13.20 Less : Hours for Table B 30000*2.5 Hours available for Table A No of units for table c with available 120000 hours : 120000/4 120000 $ 8.00 $ 21.00 30000 Ranking III Product Table A Table B Table C Product Table A Table B Table C Units produced 30000 30000 20000