Senator Pet Foods makes a variety of canned and dried food for pets. The Center Street Manufacturing Campus is the site of the original Senator plant and is used solely for the production of its original variety of canned food for dogs. The production of the food requires roughly five steps: grinding, mixing, canning, cooking, and packaging. Grinding and mixing take place in the North Building on the campus. The raw, mixed food is then transported to the South Building, also on the campus, where it is canned, cooked, and packaged in cases of 12 cans. The cases are shipped daily and are never kept in inventory. 

Weekly capacities and production levels (in cases) in the two buildings are as follows. 

The company could sell 12,000 cases weekly. The cases sell for $12 each and have a variable cost of $6 each. Fixed costs are $61,000 per week. 

Required

a. Is there a bottleneck at Senator Pet Foods’ Center Street Campus? If so, where is it?

b. The plant manager reports that capacity could be increased by 3,000 cases weekly in the North Building by producing on the weekend. Producing on the weekend would not affect the sales price. Variable cost per unit would increase by $1.50 for those cases produced on the weekend because of the premium paid to labor. Fixed costs would also increase by $7,800 per week. Should the Center Street Manufacturing Campus produce pet food on the weekend?

c. The managers at the Center Street Manufacturing Campus are also studying increasing capacity in the North Building by adding additional personnel to clean and prepare the mixer between batches. This would increase its capacity in the North Building by 2,500 cases weekly. This would not affect sales price. Variable cost would increase by $0.75 per case for all units produced. Fixed costs will increase by $4,600 per week. Should the Center Street Campus expand the North Building’s capacity by adding these additional workers? Consider this alternative independently of the situation in requirement (b).

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Capacity (weekly) Production (weekly) *********** North Bldg. 10,000 10,000 South Bldg. 15,000 10,000