Product mix decisions (Adapted from CMA, December 1991) Bakker Industries sells three products (products 611,613 , and 615 ) that it manufactures in a factory consisting of four departments (departments 1 through 4). Both labor and machine time are applied to the products in each of the four departments. The machine processing and labor skills required in each department are such that neither machines nor labor can be switched from one department to another.

Bakker's management is planning its production schedule for the next several months. The community is experiencing labor shortages. Some of the machines will be out of service for extensive overhauling. Available machine and labor time by department for each of the next 6 months follows:

The sales department's forecast of product demand over the next 6 months follows:

Bakker's inventory levels will not be increased or decreased during the next 6 months. The unit price and cost data valid for the next 6 months follow:

Required

a. Determine whether the monthly sales demand for the three products can be met by Bakker's factory. Use the monthly requirement by department for machine hours and direct labor hours for the production of products 611,613 , and 615 in your calculations.

b. What monthly production schedule should Bakker Industries select to maximize its dollar profits? Support the schedule with appropriate calculations and present a schedule of the contribution to profit that would be generated by the production schedule selected.

c. What other alternatives might Bakker Industries consider so that it can supply its customers all the products they demand?

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Monthly Capacity Availability DEPARTMENT 1 2 3 4 Normal machine capacity in machine hours Capacity of machines being repaired in 3,500 3,500 3,000 3,500 (500) (400) (300) (200) machine hours Available machine capacity in machine hours 3,000 3,100 2,700 3,300 Labor capacity in direct labor hours 4,000 4,500 3,500 3,000 Available labor in direct labor hours 3,700 4,500 2,750 2,600 Labor and Machine Specifications per Unit of Product 1222 32 0 1 1 1 1 DEPARTMENT PRODUCT LABOR AND MACHINE TIME 1 2 3 611 Direct labor hours 2 Machine hours 613 Direct labor hours 1 Machine hours 1 615 Direct labor hours 2 Machine hours 312122 0