Moroccan Ceiling Fans, Inc., employs an automated process to package its fans. One machine is used to form the cardboard boxes into which the fans and parts are placed. The manufacturer of the machine specifies that it is capable of constructing six cardboard boxes per minute. The machine is rated by Moroccan's engineers to run four boxes per minute, due to practical constraints. Output over the past three years has been 9,200 boxes per week, 9,100 boxes per week, and 9,300 boxes per week. Considering current demand for ceiling fans, the machine is budgeted to produce 8,800 boxes per week this year. The machine is operated five days per week for a single eight-hour shift. During a recently completed week, the machine's actual output was 7,200 boxes.
Required:
a) Prepare a capacity utilization variance analysis for Moroccan Ceiling Fans, Inc.
b) The manager of the packaging department has observed that once the efficiency waste variance is corrected, the machine will be operating at nearly 92% capacity. She recommends acquisition of a second machine or replacing the current machine with one that has a larger capacity. Evaluate the packaging manager's concern based on measures of capacity utilization.

Question

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The Answer of Moroccan Ceiling Fans, Inc., employs an automated process to package its fans. One machine is used to form the cardboard boxes into which the fans and parts are placed. The manufacturer of the machine specifies that it is capable of constructing six cardboard boxes per minute. The machine is rated by Moroccan's engineers to run four boxes per minute, due to practical constraints. Output over the past three years has been 9,200 boxes per week, 9,100 boxes per week, and 9,300 boxes per week. Considering current demand for ceiling fans, the machine is budgeted to produce 8,800 boxes per week this year. The machine is operated five days per week for a single eight-hour shift. During a recently completed week, the machine's actual output was 7,200 boxes.
Required:
a) Prepare a capacity utilization variance analysis for Moroccan Ceiling Fans, Inc.
b) The manager of the packaging department has observed that once the efficiency waste variance is corrected, the machine will be operating at nearly 92% capacity. She recommends acquisition of a second machine or replacing the current machine with one that has a larger capacity. Evaluate the packaging manager's concern based on measures of capacity utilization.