Review Exercises

1. Palmateer Company manufactures two products, C and P. Pertinent information is as follows:

Product C

Product P

Selling price

$90

$100

Market demand per week

100 units

50 units

Direct material costs

$45

$40

Time required to produce one unit:

Operation 1

18 minutes

10 minutes

Operation 2

15 minutes

30 minutes

Operation 3

10 minutes

5 minutes

Operation 4

12 minutes

10 minutes

Each operation has a capacity of 2,400 minutes per week.

What production schedule for C and P maximizes Palmateers weekly throughput margin? Show your computations.

2. Huntington Industries makes an electronic component in two departments, Machining and Assembly. The capacity per month is 30,000 units in the Machining Department and 20,000 units in the Assembly Department. The only variable cost of the product is direct material of $100 per unit. All direct material cost is incurred in the Machining Department. All other costs of operating the two departments are fixed costs. Huntington can sell as many units of this electronic component as it produces at a selling price of $300 per unit.

Assuming any defective units produced in either department must be scrapped:

a. Compute the loss that occurs if a defective unit is produced in the Machining Department.

b. Compute the loss that occurs if a defective unit is produced in the Assembly Department.

c. How do your answers in parts (a) and (b) relate to the theory of constraints? Explain.