Case 2. (Make necessary assumptions and solve the following questions. Show all your works: including all computational procedures and details.) Sundance and his friend Butch are in the business of baking gourmet pizza. As soon as Sundance receives an order (either an Old West Pizza or a Sundance Kid Special Pizza) by phone, Sundance washes the bowl and mixes dough according to the customer's order. He then places the pizza dough onto a pan that holds one order of pizza. His friend Butch then sets the oven and places the pan in it. Pizza is baked in the oven and allowed to cool outside. Butch then wraps the pizza and collects payment from the customer. According to their observation, 10% of Sundance Kid Special Pizza produced are defective items and must be throw away (i.e., yield rate=100%-10%=90%).

Assume that **********************************************************************

Old West Pizza price: $5.00/unit

Cost of material: $2.50/unit

Sundance Kid Special Pizza price: $7.00/unit

Cost of material: $1.00/unit

Old West Pizza maximum weekly demand : 80 units

Sundance Kid Special Pizza maximum weekly demand: 60 units

Scheduled availability in 1 week (Oven, Sundance, Butch= 1200minutes)

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(a)Determine

(a.1) Margin per Bottleneck Resource minute (Benefit/Cost ratio),

(a.2) Optimal (Profit Maximizing) Product Mix, and

(a.3) Total Profit.

(b) Determine if the Pizza shop should change their optimal product mix if

(b.1) Sundance Kid Special Pizza price has been reduced by 2.5$. If so, then what should be the new product mix? Why?

(b.2) Sundance Kid Special Pizza price has been increased by $15. If so, then what should be the new product mix? Why?

(c) Butch suggests that they can increases the yield rate of Sundance Kid Special Pizza from 90% to 95% by investing on the production process improvement program (PIP). To apply the PIP, the cost of PIP must not be higher than $X= ?.

Visit I 10 10 10 e (Sundance Kid Special Pizza) # Activities Wash and Mix 24 Place 34 Load and Seta Baked 54 Unload and Coole 6 Wrap Accept Payment Activity Time 6 minutes 3 minutes 3 minutes 6 minutes 2 minutes 5 minutes 2 minutes Resources Allocated Sundance Sundance Butch, Oven Oven Butch Butch Butche 1.54 24 1, 4 IN 10 7 24 A Visit C 1 10 16 I (Old West Pizza) # Activities Wash and Mix 24 Place 34 Load and Set 44 Bake 55 Unload and Coole 6 Wrap Accept Payment le 1.54 I Activity Time 5 minutes 3 minutes 1 minutes 9 minutes 1 minutes 3 minutes 2 minutes Resources Allocated Sundance Sundance Butch, Oven Oven Butch Butch Butche 1 14 le 24 I 7 Visit I 10 10 10 e (Sundance Kid Special Pizza) # Activities Wash and Mix 24 Place 34 Load and Seta Baked 54 Unload and Coole 6 Wrap Accept Payment Activity Time 6 minutes 3 minutes 3 minutes 6 minutes 2 minutes 5 minutes 2 minutes Resources Allocated Sundance Sundance Butch, Oven Oven Butch Butch Butche 1.54 24 1, 4 IN 10 7 24 A Visit C 1 10 16 I (Old West Pizza) # Activities Wash and Mix 24 Place 34 Load and Set 44 Bake 55 Unload and Coole 6 Wrap Accept Payment le 1.54 I Activity Time 5 minutes 3 minutes 1 minutes 9 minutes 1 minutes 3 minutes 2 minutes Resources Allocated Sundance Sundance Butch, Oven Oven Butch Butch Butche 1 14 le 24 I 7