A company makes two products, Product A and Product B. The product characteristics are shown in the following table.
Product A B
Price ($/unit) $800 $1,000
Cost of materials ($/unit) $200 $250
Cost of labor ($/unit) $150 $200
Market demand per week (units) 200 150
The products are fabricated and assembled in 4 different workstations (W, X, Y, Z). Each workstation is available for 60 hours a week and there is no setup time required when shifting from the production of one product to any other. The processing requirements to make one unit of each product are shown in the table.
Processing time (min/unit)
Workstation Product A Product B
W 8 12
X 9 12
Y 10 20
Z 5 8
a) Using the traditional method, which refers to maximizing the contribution margin per unit for each product, what is the optimal product mix and resulting profit?
b) Using the bottleneck method, which refers to maximizing the contribution margin per minute at the bottleneck for each product, what is the optimal product mix and resulting profit?