Curtis Corporation makes skis in two departments: Department A makes the frame and Department B adds the bindings and paints the skis. Monthly capacities and production levels are as follows:
Department A Department B
Monthly capacity 4,000 pairs of skis 5,000 pairs of skis
The company can sell as many pairs of skis that it can produce each month. A pair of skis sells for $500 and has a variable cost of $250.
Required:
- How many pairs of skis does Curtis presently sell and what department is the bottleneck?
- Curtis' production supervisors state they could increase Department A monthly capacity by 500 pairs of skis on the weekend. Producing on the weekend would not affect the sales price or variable cost per unit, but would increase fixed costs by $60,000 per month. Should Curtis produce skis on the weekend?
- Independent of the situation in requirement (b), Curtis could add additional equipment and workers to Department B, which will increase Department B capacity by 500 pairs per month. This would not affect sales price or variable cost per unit, but would increase fixed cost by $80,000 per month. Should Curtis add the additional equipment and workers to Department B?
- Explain how your answers in parts (b) and (c) relate to the theory of constraints.