Table 7.7
A company makes four products that have the following characteristics: Product A sells for $75 but needs $20 of materials and $20 of labor to produce;Product B sells for $90 but needs $45 of materials and $20 of labor to produce;Product C sells for $110 but needs $50 of materials and $30 of labor to produce;Product D sells for $135 but needs $75 of materials and $40 of labor to produce.The processing requirements for each product on each of the four machines are shown in the table. Work centers W,X,Y,and Z are available for 40 hours per week and have no setup time when switching between products.Market demand is 50 As,60 Bs,70 Cs,and 80 Ds per week.In the questions that follow,the traditional method refers to maximizing the contribution margin per unit for each product,and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product.
-Use the information in Table 7.7.Using the traditional method,in what sequence should products be scheduled for production?
A)A,B,C,D
B)A,C,B,D
C)A,D,B,C
D)D,B,C,A

Question

Table 7.7
A company makes four products that have the following characteristics: Product A sells for $75 but needs $20 of materials and $20 of labor to produce;Product B sells for $90 but needs $45 of materials and $20 of labor to produce;Product C sells for $110 but needs $50 of materials and $30 of labor to produce;Product D sells for $135 but needs $75 of materials and $40 of labor to produce.The processing requirements for each product on each of the four machines are shown in the table.  Work centers W,X,Y,and Z are available for 40 hours per week and have no setup time when switching between products.Market demand is 50 As,60 Bs,70 Cs,and 80 Ds per week.In the questions that follow,the traditional method refers to maximizing the contribution margin per unit for each product,and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product.
-Use the information in Table 7.7.Using the traditional method,in what sequence should products be scheduled for production?
A)A,B,C,D 
B)A,C,B,D 
C)A,D,B,C 
D)D,B,C,A

Quizplus · Accepted Answer

To use the traditional method, we need to calculate the contribution margin per unit for each product, which is the selling price minus the cost of materials and labor.

For Product A: $75 - $20 - $20 = $35 CM/unit 
For Product B: $90 - $45 - $20 = $25 CM/unit 
For Product C: $110 - $50 - $30 = $30 CM/unit 
For Product D: $135 - $75 - $40 = $20 CM/unit

Next, we need to calculate the contribution margin per minute on each machine, by dividing the contribution margin per unit by the processing time per unit on that machine.

Machine W:
Product A: $35/12 = $2.92 CM/min 
Product B: $25/30 = $0.83 CM/min 
Product C: $30/15 = $2 CM/min 
Product D: $20/20 = $1 CM/min

Machine X:
Product A: $35/4 = $8.75 CM/min 
Product B: $25/10 = $2.5 CM/min 
Product C: $30/20 = $1.5 CM/min 
Product D: $20/5 = $4 CM/min

Machine Y:
Product A: $35/10 = $3.5 CM/min 
Product B: $25/12 = $2.08 CM/min 
Product C: $30/30 = $1 CM/min 
Product D: $20/10 = $2 CM/min

Machine Z:
Product A: $35/8 = $4.38 CM/min 
Product B: $25/8 = $3.13 CM/min 
Product C: $30/10 = $3 CM/min 
Product D: $20/15 = $1.33 CM/min

We can see that Machine X is the bottleneck machine since it has the lowest contribution margin per minute for all products. Therefore, we should prioritize production on Machine X and schedule the products accordingly.

Based on the processing times and market demands, the most efficient schedule is:

10 hours of Product A on Machine X 
5 hours of Product C on Machine X 
20 hours of Product D on Machine X 
10 hours of Product B on Machine X

This schedule will use all available machine hours, meet market demand, and maximize contribution margin per unit using the traditional method. Therefore, the answer is B: A, C, B, D.

Table 7.7 A Company Makes Four Products That Have the Following Characteristics