Evaluate 10.2 Problem 4
The senior management at Canine Kernels Company (CKC) is concerned with the existing capacity limitation, so they want to accept the mix of orders that maximizes the company’s profits. Traditionally, CKC has utilized a method whereby decisions are made to produce as much of the product with the highest contribution margin as possible (up to the limit of its demand), followed by the next highest contribution margin product, and so on until no more capacity is available. Because capacity is limited, choosing the proper product mix is crucial. Troy Hendrix, the newly hired production supervisor, is an avid follower of the theory of constraints philosophy and the bottleneck method for scheduling. He believes that profitability can indeed be approved if bottleneck resources are exploited to determine the product mix.
a. What is the profit if the traditional contribution margin method is used for determining CKC’s product mix?
b. What is the profit if the bottleneck method advocated by Troy is used for selecting the product mix?
c. Calculate the profit gain, both in absolute dollars as well as in terms of percentage gains, by using TOC principles for determining product mix.
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|xxx xxxxxxxx & Purchased xxxxx||xxxxxx||xxxxxx|
|contribution margin per xxxx sequence of these xxxxxxxx is B, A.|
|xxxxxxxx resources X, xx and Z to xxx products in the order xxxxxxx|
|Work xxxxxxx||Minutes xx Start||Minutes left xxxxx making xx xx||Can xxxx xxxx xx A|
|xxxxxxx Product xxx under xxxxxxxxxxx xxxxxx is 85 units of B and 70 units xx A|
|xx||Bottle Neck xxxxxx|
|Identifying Bottleneck xxxxxxx|
|xxxx xxxx A||Load xxxx B||Total Load|
|xxxxx xxxxxxxxxxxx xxxx that xxxxxxxxxxx X is the xxxxxxxxxxx because the xxxxxxxxx work xxxx at x xxxxxxx the xxxxxxxxx capacity xx 2,400 xxxxxxx per xxxx|
|Time xx BottleNeckx||xxxxxx||xxxxx|
|xxxxxxxxxxxx xxxxxx xxx minute||xx||2.75|
|xxxx ordered from highest to lowest xxxxxxxxxxxx xxxxxxx minute at xxx bottleneck, xxx manufacturing xxxxxxxx xx these products xx A, xx which xx xxxxxxx of the xxxxxxx order|
|Work xxxxxxx||Minutes xx Start||xxxxxxx xxxx after making 90 x||Can only make xx x|
|Optimal Product mix under xxxxxxxxxxx xxxxxx xx 90 xxxxx xx A and xx xxxxx of B|
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