A.J.\'s Wildlife Emporium manufactures two unique birdfeeders (Deluxe and Super

Question

A.J.'s Wildlife Emporium manufactures two unique birdfeeders (Deluxe and Super Duper) that are manufactured and assembled in up to three different workstations (X, Y, and Z) using a small batch process. Each of the products is produced according to the flowchart below. Additionally, the flowchart indicates each product's price, weekly demand, and processing times per unit. Batch setup times are negligible. A.J. can make and sell up to the limit of its weekly demand and there are no penalties for not being able to meet all of the demand. Each workstation is staffed by a worker who is dedicated to work on that workstation alone and is paid $18 per hour. The plant operates 40 hours per week, with no overtime. Overhead costs are $3,000 per week. Based on the information provided, as well as the information contained in the flowchart, answer the following questions.

a. Using the traditional method, which bases decisions solely on a product's contribution to profits and overhead, what is the optimal product mix and what is the overall profitability?

Deluxe Step 1 Station Z (24 min) Step 2 Station Y (15 min) Step 3 Station X (14 min) Product: Deluxe Price: S71/unit Demand: 57 units/wk $7 Raw materials Purchased part Step 1 Station X Step 2 Station Z (11 min) Step 3 Station Y (18 min) Product: Super Duper Price: S69/unit Demand: 74 units/wk $5 (24 min) Raw materials Purchased part

Explanation / Answer

Per unit production details as below:

So as per the traditional model, first the demand for Super deluxe must be filled as its more profitable and then Deluxe must be taken up.

If we try to meet both the demands

We have

So we get 2.90 is excess.

So first Super deluxe is filled and the rest available hour is provided for Deluxe:

So we have:

Cost Step 1 Step 2 Step 3 Total Cost Cost Total cost Price Profit Raw Material Time Time Time Time hr Labor Part Deluxe 7 0.4 0.25 0.233333 0.883333 15.9 12 34.9 71 36.1 Super deluxe 5 0.4 0.183333 0.3 0.883333 15.9 4 24.9 69 44.1

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