Question on Bottlenecks Essay

5 Bottlenecks 36 a few minutes

F Company makes and sells two products, A and M, each which passes throughout the same computerized production procedures. The following believed information can be bought for period 1 .

Merchandise unit data

A M

Direct materials cost ($) 2 40

Variable production overhead expense ($) twenty-eight 4

General hours per product unit (hours) 0. 25 zero. 15

������ Original estimates of production/sales of products A and M are one hundred twenty, 000 models and forty-five, 000 models respectively. The selling prices every unit for any and W are $60 and $70 respectively. ������ Maximum with regard to each method 20% above the estimated revenue levels. ������ Total set production over head cost is $1, 470, 000. This is consumed by products A and B in a average charge per hour based upon the believed production amounts. One of the production operations provides a maximum potential of 3, 075 hours which has been identified as a bottleneck which in turn limits the entire estimated production/sales of products A and B. The logjam hours required per merchandise unit intended for products A and N are 0. 02 and 0. 015 respectively.

Necessary: (a) Estimate the mix (in units) of goods A and B that may maximise net profit plus the value (in $) from the maximum net profit. (6 marks)

(b) F Company has now chosen to determine the profit-maximising mixture of products A and N based on the throughput accounting principle of maximising the throughput returning per creation hour of the bottleneck resource.

Given that the variable cost to do business cost, based upon the value (in $) which will applies to the first estimated production/sales mix, is actually considered to be set for the short/intermediate term: (i) Estimate the mix (of units) of goods A and B which will maximise net profit plus the value of the net income. (8 marks)

(ii) Estimate the throughput accounting rate for item B and comment on this. (3 marks) (iii) Approximately the direct material expense per...

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