Question 14 - Additional question (Adapted Regular exam 2019) Solar System Co (S Co) makes two types of solar panels at its manufacturing plant: large panels for commercial customers and small panels for domestic customers. All panels are produced using the same materials, machinery and a skilled labour force. Production takes place for five days per week, from 7 am till 8 pm (13 hours), 50 weeks of the year. Each panel has to be cut, moulded and then assembled using a cutting machine (Machine C ), a moulding machine (Machine M) and an assembly machine (Machine A). As part of a government scheme to increase renewable energy sources, S Co has guaranteed not to increase the price of small or large panels for the next three years. It has also agreed to supply a minimum of 1,000 small panels each year to domestic customers for this three year period. Due to poor productivity levels, late orders and declining profits over recent years, the finance director has suggested the introduction of throughput accounting within the organisation, together with a "Just in Time" system of production. Material costs and selling prices for each tvpe of panel are shown below. Total factory costs, which include the cost of labour and all factory overheads, are N$12 million each year at the plant. Out of the 13 hours available for production each day, workers take a one hour lunch break. For the remaining 12 hours, machine C is utilised 85% of the time and Machine M and A are utilised 90% of the time. The unproductive time arises either as a result of routine maintenance or because of staff absenteeism, as each machine needs to be manned by skilled workers in order for the machine to run. The skilled workers are currently only trained to work on one type of machine each. Maintenance work is carried out by external contractors who provide a round the clock service (that is, they are available 24 hours a day, seven days a week), should it be required. The following information is available for Machine M, which has been identified as the bottleneck resource: 9 There is currently plenty of space capacity on Machine C and A. Maximum annual demand for large panels and small panels is 1,800 units and 1,700 units respectively. \begin{tabular}{|c|l|c|} \hline REQUIRED: & Marks \\ \hline 14.1. & Discuss the concepts on which throughput accounting is based & 6 \\ \hline 14.2. & Calculate the total profit assuming maximum annual demand is sold & 8 \\ \hline 14.3. & \begin{tabular}{l} Calculate the throughput accounting ratio for each solar panel and \\ comment on the results. \end{tabular} & 11 \\ \hline TOTAL MARKS & 20 \\ \hline \end{tabular}