Utilization of Constrained Resources Using Excel

Backyard Helpers, Inc. is a small manufacturing company with 18 different gardening tools in its product line. All of the products are fabricated using the same equipment.

Recently, sales demand has increased. Unfortunately, Backyard Helpers cannot produce enough products with existing equipment to meet that demand. Facilities can be expanded, and new equipment purchased, but it will be at least two years before that happens. The production manager needs to make production scheduling decisions now.

Maximum machine time is 40,500 minutes per month. The demand for all products is spread equally throughout the month. Fixed costs (manufacturing, selling, and administrative) total $755,750 per month. Backyard Helpers maintains no inventory of finished goods: all units produced are sold during the month.

a. Ignore machine time limits in answering the following:

1. Which product has the highest contribution margin per unit?

How many units of that product should be produced each month?

2. If Backyard could meet demand, what would be the total net operating income per month?

Note: Do not use a negative sign with your answers.

Total contribution margin	Answer
Fixed costs	Answer
Net operating income	Answer

b. If demand was unlimited for all products, which product should Backyard Helpers produce?

c. Given the maximum number of machine minutes per month and the expected demand per month, use Solver in Excel to answer the four questions that follow. To prepare your worksheet to use the Solver tool, add columns with formulas for (1) contribution margin per unit, (2) total quantity in units, (3) total machine minutes, and (4) total contribution margin. In the Solver tool window, enter the cell that you would like to maximize (Hint: It is a single cell), identify the variables (Hint: Use quantity in units column) and enter the constraints (Hint: There are two constraints relating to demand and machine minutes).

1. How many of the following products should be produced each month?

Note: Round quantities to the nearest whole unit.

2. Which products would be temporarily eliminated from Backyard Helpers product line under the Excel solution?

3. What is the total net operating income per month given the machine time constraints and the quantities determined by Solver?

4. What is the maximum amount Backyard Helpers should be willing to pay to rent fabrication time from another company? (Assume transportation and other costs would total $50,000.) $

\begin{tabular}{|c|c|c|c|c|c|c|c|} \hline Products & \begin{tabular}{c} Expected \\ Demand per \\ Month \\ \end{tabular} & \begin{tabular}{c} Sales \\ Price Per \\ Unit \\ \end{tabular} & \begin{tabular}{c} Direct \\ Materials \\ Per Unit \\ \end{tabular} & \begin{tabular}{c} Direct \\ Labor \\ Per Unit \\ \end{tabular} & \begin{tabular}{c} Variable \\ MOH Per \\ Unit \\ \end{tabular} & \begin{tabular}{l} Variable \\ Selling \\ Per Unit \\ \end{tabular} & \begin{tabular}{l} Machine \\ Minutes \\ Per Unit \\ \end{tabular} \\ \hline A1590 & 1,250 & 64.50 & 14.50 & 7.50 & 3.50 & 1.30 & 1.30 \\ \hline A1590S & 1,375 & 64.80 & 16.00 & 7.50 & 3.50 & 1.35 & 1.32 \\ \hline A2000 & 1,550 & 68.00 & 17.00 & 7.50 & 3.50 & 1.50 & 1.40 \\ \hline A2000S & 1,410 & 70.00 & 18.50 & 7.50 & 3.50 & 1.60 & 1.42 \\ \hline JK369 & 625 & 120.00 & 65.00 & 10.00 & 6.00 & 2.50 & 1.50 \\ \hline JK745 & 750 & 140.00 & 80.00 & 10.00 & 6.00 & 3.00 & 1.55 \\ \hline LWW7891 & 3,125 & 35.00 & 8.00 & 4.00 & 1.60 & 0.65 & 0.90 \\ \hline LWW8025 & 3,250 & 37.50 & 9.50 & 4.00 & 1.60 & 0.70 & 0.80 \\ \hline LWW9338 & 3,000 & 40.00 & 11.00 & 4.00 & 1.60 & 0.70 & 0.75 \\ \hline LWW9799 & 3,400 & 45.00 & 12.00 & 4.00 & 1.60 & 0.75 & 1.00 \\ \hline R25 & 3,250 & 15.00 & 2.00 & 2.00 & 1.40 & 0.25 & 0.50 \\ \hline R28 & 7,500 & 18.00 & 2.50 & 2.00 & 1.40 & 0.30 & 0.75 \\ \hline R30 & 3,875 & 22.00 & 3.00 & 2.00 & 1.40 & 0.35 & 0.80 \\ \hline R25-D & 7,500 & 18.00 & 3.50 & 2.00 & 1.40 & 0.30 & 0.60 \\ \hline R28-D & 9,375 & 21.00 & 4.00 & 2.00 & 1.40 & 0.35 & 0.65 \\ \hline R30-D & 6,250 & 25.00 & 5.00 & 2.00 & 1.40 & 0.40 & 0.70 \\ \hline TWZ225 & 1,560 & 50.00 & 14.00 & 6.00 & 3.50 & 1.20 & 1.30 \\ \hline TWZ399 & 1,875 & 55.00 & 16.00 & 6.50 & 3.50 & 1.25 & 1.35 \\ \hline \end{tabular}