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Galaxy Industries has been very successful during its first six months of operation and is already looking toward production expansion and possible relocation within
Galaxy Industries has been very successful during its first six months of operation and is already looking toward production expansion and possible relocation within the year to a facility in Juarez, Mexico, where both labor and material costs are considerably lower. The availability of cheaper labor and a contract with a local distributor to supply up to 3000 pounds of plastic material at a substantially reduced cost will effectively double the profit for Space Rays to $16 per dozen and triple the profit for Zappers to $15 per dozen. The new facility will be equipped with machinery and staffed with workers to facilitate a 40-hour regular time work schedule. In addition, up to 32 hours of overtime can be scheduled. Accounting for wages, benefits and additional plant operating expenses, each scheduled overtime hour will cost the company $180 more than regular time hours. Galaxy has been test marketing two additional products, tentatively named the Big Squirt and the Soaker, which appear to be as popular as the Space Ray and Zapper. The table below summarizes the profit and requirements for each product line. Plastic (lb.) Production Time(min.) Product Profit Space Rays $16 2 3 Zappers $15 1 4 Big Squirts $20 3 5 Soakers $22 4 6 Available 3000 40 hrs. (Reg.) 32 hrs. (O/T) Table 1: Profit and Requirements per Dozen Galaxy has signed a contract with Jaycee Toys, Inc. to supply it with 200 dozen Zappers weekly once the relocation has taken place. The marketing department has revised its strategy for the post-relocation period. It has concluded that, to keep the total demand at its peak, Galaxy's most popular model, the Space Ray, should account for exactly 50% of total production, while no other product line should account for more than 40%. The production capacity should be no less than 1000 dozens units weekly. Management would like to determine the weekly production schedule (including any overtime hours, if necessary) that will maximize its net weekly profit.
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