Throughput contribution:
Victoria Hair Salon styles hair in three operations—washing, cutting/setting, and drying—and charges $25 per styling. (Each styling is one "unit.") Victoria styles hair on a walk-in basis and does not take appointments; customers who face a wait walk across the street to another salon. Victoria's owners find it has a cutting/setting bottleneck on Saturdays due to a limited number of stylists. The bottleneck exists for a total of eight hours each Saturday. Pertinent information follows:
Washing Cutting/Setting Drying
Hourly Capacity ........................................................ 30 Units 12 Units 15 Units
Saturday Capacity (8 hours)........................................ 240 Units 96 Units 120 Units
Actual Saturday Production ........................................ 96 Units 96 Units 96 Units
Each hair styling has variable costs of $10. Victoria's output is constrained by the 96 units of cutting/setting capacity. Two options exist that can relieve the bottleneck at the cutting/setting operation. Consider the differential costs associated with each of the following options to determine the impact on throughput.
Option 1. Victoria can increase bottleneck output by hiring one nonstylist employee to prepare customers for the cutting/setting by washing and combing their hair. This would increase the cutting/setting capacity to 120 each Saturday. The cost for this additional employee is $100 per Saturday.
Option 2. Victoria could hire another stylist for each Saturday, increasing the cutting/setting capacity to 108 each Saturday and costing an additional $200 per Saturday. (Note that the drying operation has a capacity of 120.)
Should Victoria's owner go ahead with either of the two options? Why or why not?