Insearch Productions Pty Ltd produces two types of bike frames (Frame X and Frame

Y). Frame X passes through four processes: Cutting, Welding, Polishing, and

Painting. Frame Y uses three of the same processes: Cutting, Welding, and Painting.

Each of the four processes employs ten workers who work eight hours each day.

Frame X sells for $40 per unit, and Frame Y sells for $55 per unit. Raw materials are

the only unit-level variable expense. The materials cost for Frame X is $20 per unit,

and the materials cost for Frame Y is $25 per unit. Insearchs accounting system has

provided the following additional information about its operations and products:

Frame X Frame Y

Resource name Resource available Usage: per unit Usage: per unit

Cutting labour 4800 minutes 15 minutes 10 minutes

Welding labour 4800 15 30

Polishing labour 4800 15 NA

Painting labour 4800 10 15

Market demand for X: 200 per day

Market demand for Y: 100 per day

Note: Any production interruptions can be corrected within 2 days.

Required:

1 Apply the 5 steps in the TOC approach to Insearch Productions. Specifically,

discuss:

a. What is Insearchs major binding constraint? Support your answer with

calculations.

b. Suggest three ways that Insearch exploit its binding constraint. Explain

your answer, and support your answer with calculations where appropriate.

c. What does subordinate all other activities mean? Why is it an important

step in managing Insearchs resources?

d. What does elevating the constraint mean? Provide one example of how

Insearch may be able to elevate its binding constraint.

e. What is the fifth TOC step? Assuming that the binding constraint you have

identified in (a) has been elevated, what is the next binding constraint

Insearch needs to focus on?

2 Suppose that the engineering department has proposed a process design

change that will increase the polishing time for Frame X from 15 to 23

minutes per unit and decrease the welding time from 15 minutes to 10 minutes

per unit (for Frame X). The cost of process redesign would be $10,000. How

long would it take to break even if the process redesign were to go ahead?

Should the proposal be accepted? What step in the TOC process does this

proposal represent?

3 Provide at least two potential issues surrounding the implementation/use of

TOC principles in practice.