Question
Yinu Inc. makes three different products, D, L and B and Department X has been identified as the bottleneck. In this department all three products
Yinu Inc. makes three different products, D, L and B and Department X has been identified as the bottleneck. In this department all three products use the same four machines which can only be operated eight hours a day and five days a week. Further information are given below: Product D Product L Product B Estimated production (units) 24,000 30,000 55,000 Selling price per unit 1.00 0.80 1.20 Material costs per unit 0.25 0.15 0.28 Labour costs and factory overhead cost for 10 units 4 0.20 1 Hours required in Department X for 100 units 2 5 3 Monthly labour and factory overheads are constant at 18,500.
a. Calculate the throughput accounting ratio for each of the three products. [6 marks]
b. Advise the management of Yinu Inc. on the number of units to make for each product in a month. [3 marks]
c. Comment on other factors Yinu Inc. could consider to maximise their operating profit given the bottleneck resource. [3 marks]
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