PA7-6 (Algo) Making Decisions Involving Constrained Resource [LO 7-2, 7-7]

Blossom, Incorporated, is a small company that manufactures three versions of patio tables. Unit information for its products follows:

	Table A	Table B	Table C
Sales price	$ 55	$ 59	$ 73
Direct materials	11	12	13
Direct labor	3	5	9
Variable manufacturing overhead	5	5	5
Fixed manufacturing overhead	8	8	8
Required number of labor hours	0.50	0.50	1.00
Required number of machine hours	4.00	2.50	2.00

Blossom has determined it can sell a limited number of each table in the upcoming year. Expected demand for each model follows:

Table A	60,000	units
Table B	20,000	units
Table C	20,000	units

Required:

1. Suppose direct labor hours have been identified as the bottleneck resource. Determine how Blossom should prioritize production by rank, i.e., ordering the products from 1 to 3.
2. If Blossom has only 50,000 direct labor hours available, calculate the number of units of each table Blossom should produce to maximize its profit.
3. Suppose the number of machine hours has been identified as the most constrained resource. Determine how Blossom should prioritize production by rank, i.e., ordering the products from 1 to 3.
4. If Blossom has only 247,000 machine hours available, calculate the number of units of each table Blossom should produce to maximize its profit.