Application 5.1

ONeill Enterprises manufactures three unique products (A, B, C) that are fabricated and assembled in four different workstations (W, X, Y, Z) using a small batch process. Each of the products visits every one of the four workstations, though not necessarily in the same order. Batch setup times are negligible. ONeill can make and sell up to the limit of its demand per week, and there are no penalties for not being able to meet all the demand. Each workstation is staffed by a worker dedicated to work on that workstation alone, and is paid $12 per hour. Variable overhead costs are $8000/week. The plant operates one 8-hour shift per day, or 40 hours/week.

Which of the four workstations W, X, Y, or Z has the highest total workload, and thus serves as the bottleneck for ONeill Enterprises?

Work-station	Load from product A	Load from product B	Load from product C	Total
W
X
Y
Z

Application 5.2

Traditional Method:

1.Calculate contribution margin per unit of each product

Product A	Product B	Product C	Order of production:

2. Allocate resources to production

Work -station	Minutes @ Start	After Making ___________	After Making ____________	After Making ____________
W	2400
X	2400
Y	2400
Z	2400

3. Compute profit for the product mix

Revenue:

Materials:

Labor:

Overhead:

Profit:

Bottleneck method:

1.Calculate contribution margin per unit per minute at bottleneck of each product

Product A	Product B	Product C	Order of production:

2. Allocate resources to production

Work -station	Minutes @ Start	After Making ___________	After Making ____________	After Making ____________
W	2400
X	2400
Y	2400
Z	2400

3. Compute profit for the product mix

Revenue:

Materials:

Labor:

Overhead:

Profit:

Product A Finish with Product: A at workstation D:65 units/wk Step 1 at workstation Step 2 at workstation Step 3 at workstation $7 step 4 P: $90/unit (10 min) (15 min) (9 min) Raw materials min 6 Purchased part Product B Step 1 at workstation Step 2 at workstation Step 3 at workstation Finish with step 4 $9 Product: B at workstation P: $85/unit D:70 units/wk (12 min) (10 min) (10 min) Raw materials min $5 Purchased part Product C Finish with Product: C Step 1 at workstation Step 2 at workstation Step 3 at workstation step 4 10 P: $80/unit at workstation fD: 80 units/wk (5 min) (10 min) (12 min) min Raw materials Purchased part