Senior management at the LCB Watercraft (LCBW) company would like you to help pick the mix of products they should produce and sell – this involves determining the production quantities for each model. LCBW always has a contingent of 10 workers on hand; each is paid $25 per hour. Overhead costs are $35,000 per week. The manufacturing plant consists of 4 stations and operates 18 hours per day and 6 days per week. Labor is a fixed expense because workers are paid for their time regardless of their utilization. Detailed production information is provided below.
Model A Model B Model C
Unit Price $450 $400 $500
Unit Material Cost $50 $40 $110
Table Continued…. Model A Model B Model C
Weekly Demand 100 75 40
Unit Processing Time Station 1 60 min 0 min 30 min
Unit Processing Time Station 2 0 min 0 min 60 min
Unit Processing Time Station 3 10 min 60 min 0 min
Unit Processing Time Station 4 20 min 30 min 40 min
a. Identify the bottleneck resource (station). Show your work load calculations you use or explain the logic you use to determine the bottleneck.
b. If we prioritize A, B, and C using their unit profit values (by favoring the product with higher unit profit margin), what would be the weekly production plan (quantities / mix of A, B, C produced each week) and the resulting profit?
c. If we prioritize A, B, and C using the bottleneck ratio method, what would be the weekly production plan and the resulting profit? Show intermediate bottleneck ratio and other calculations (in sufficient logical detail to explain the approach used so you can recall it for an exam, if needed).