2. Operating expenses (including labor) total a constant $12,000 per week. Raw m
ID: 434172 • Letter: 2
Question
2. Operating expenses (including labor) total a constant $12,000 per week. Raw materials are not included in weekly operating expenses. Which product mix provides the highest gross profit? (Hint: consider raw material cost but not operating expense).(Round down your answers to the nearest whole number.)
3. Operating expenses (including labor) total a constant $12,000 per week. Raw materials are not included in weekly operating expenses. What is the maximum weekly net profit this plant can earn using the product mix from Part b)? (Hint: consider operating expense and raw material cost).
The M-N plant manufactures two different products: M and N. Selling prices and weekly market demands are shown in the following diagram. Each product uses raw materials with costs as shown. The plant has three different machines: A, B, and C. Each performs different tasks and can work on only one unit of material at a time Product N $200/unit 50 units/week Product M Resources: A, B, C (one each) Availability: 2,400 min./week Operating expense: $12,000/week $190/unit 100 units/week 15 min./unit 15 min /unit 20 min /unit 15 min./unit 15 min./unit RM-1 $60/unit RM-2 $40/unit M-3 $40/unit Process times for each task are shown in the diagram. Each machine is available 2,400 minutes per week. There are no "Murphys" (major opportunities for the system to foul up). Setup and transfer times are zero. Demand is constant Operating expenses (including labor) total a constant $12,000 per week. Raw materials are not included in weekly operating expenses Which machine is the constraint in this plant?Explanation / Answer
2.
Gross profit of product M = 190-60-40 = $ 90
Gross profit of product N = 200-40-40 = $ 120
Product N provides the highest gross profit.
3.
Product mix using bottleneck method
Identify the bottleneck station
Workload of station A = 20*100 = 2000 minutes
Workload of station B = 15*(100+50) + 15*50 = 3000 minutes
Workload of station C = 15*100 + 15*50 = 2250 minutes
Workload of station B is greater than the available 2400 minutes. Therefore, it is the bottleneck.
Gross of profit of product M per minute of bottleneck station B = 90/15 = 6
Gross of profit of product N per minute of bottleneck station B = 120/30 = 4
Gross of profit of product M per minute of bottleneck station B is higher. Therefore, it is prioritized.
Minutes left on station B after production of 100 units of product M = 2400 - 15*100 = 900
Number of product N can be produced = 900/30 = 30
Optimal product mix is: M = 100, N = 30
Maximum weekly net profit = 100*90 + 30*120 - 12000 = $ 600
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