Question

Roedel Electronics produces tablet computer accessories, including integrated keyboard tablet stands that connect a keyboard to a tablet device and hold the device at a preferred angle for easy viewing and typing. Roedel produces two different sizes of integrated keyboard tablet stands, small and large. Each size uses the same keyboard attachment, but the stand consists of two different pieces, a top flap and a vertical stand that differ by size. Thus, a completed integrated keyboard tablet stand consists of three subassemblies that are manufactured by Roedel: a keyboard, a top flap and a vertical stand.

Roedel's sales forecast indicates that 7,000 small integrated keyboard tablet stands and 5,000 large integrated keyboard tablet stands will be needed to satisfy demand during the upcoming Christmas season. Because only 500 hours of in-house manufacturing time are available, Roedel is considering purchasing some, or all, of the subassemblies from outside suppliers. If Roedel manufactures a subassembly in-house, it incurs a fixed setup cost as well as a variable manufacturing cost. The following table shows the setup cost, the manufacturing time per subassembly, the manufacturing cost per subassembly, and the cost to purchase each of the subassemblies from an outside supplier:

Manufacturing
Subassembly	Setup Cost ($)	Time per Unit (min.)	Cost per Unit ($)	Purchase Cost per Unit ($)
Keyboard	1,000	0.9	0.40	0.65
Small top flap	1,200	2.2	2.90	3.45
Large top flap	1,900	3.0	3.15	3.70
Small vertical stand	1,500	0.8	0.30	0.50
Large vertical stand	1,500	1.0	0.55	0.70

(a)	Determine how many units of each subassembly Roedel should manufacture and how many units Roedel should purchase. If an amount is zero, enter “0”.

Quantity Subassembly Production Purchase Keyboard Small Top Flap Large Top Flap Small Vertical Stand Large Vertical Stand
	What is the total manufacturing and purchase cost associated with your recommendation?
	$

(b)	Suppose Roedel is considering purchasing new machinery to produce large top flaps. For the new machinery, the setup cost is $3,000; the manufacturing time is 2.5 minutes per unit , and the manufacturing cost is $2.60 per unit. Assuming that the new machinery is purchased, determine how many units of each subassembly Roedel should manufacture and how many units of each subassembly Roedel should purchase. If an amount is zero, enter “0”.
	Quantity Subassembly Production Purchase Keyboard Small Top Flap Large Top Flap Small Vertical Stand Large Vertical Stand
	What is the total manufacturing and purchase cost associated with your recommendation?
	$
	Do you think the new machinery should be purchased?
	Yes or No?

Answer 1

(a) The optimal manufacturing and purchase plan is determined using Solver as under:

FORMULAS:

Cell	Formula	Copy to
D10	=SUM(B10:C10)	D10:D14
H10	=G10*E10-B10	H10:H14
B18	=SUMPRODUCT(B10:B14,C2:C6)
B20	=SUMPRODUCT(B10:C14,D2:E6)+SUMPRODUCT(G10:G14,B2:B6)

Total manufacturing and purchasing cost = $ 52,800

(b) The revised spreadsheet model and optimal manufacturing and purchase plan is determined using Solver as under:

Optimal plan

Subassembly	Production	Purchase
Keyboard	0	12000
Small Top Flap	7000	0
Large Top Flap	5000	0
Small Vertical Stand	0	7000
Large Vertical Stand	0	5000

Total manufacturing and purchasing cost = $ 52,300

Total cost is lower than part a, therefore, the machinery should be purchased