Question

Lulwa WLL produces a component that is subsequently used in the aluminum industry. The component consists of three parts (A, B, and C) that are purchased from outside and cost 0.40BD, 0.35BD, and 0.15BD per piece, respectively.

·         Parts A and B are assembled first on assembly line 1, which produces 140 components per hour.

·         Part C undergoes a drilling operation before being finally assembled with the output from assembly line 1.

·         There are in total six drilling machines, but at present only three of them are operational.

·         Each mixing drilling drills part C at a rate of 50 parts per hour.

·         In the final assembly, the output from assembly line 1 is assembled with the drilled part C. The final assembly line produces at a rate of 160 components per hour.

·         At present, components are produced eight hours a day and five days a week.

·         Management believes that is need arises, it can add a second shift of eight hours for the assembly lines.

Other Costs:

·         The cost of assembly labor is 0.30 BD per part for each assembly line;

·         The cost of mixing labor is 0.15 BD per part.

·         For mixing, the cost of electricity is 1 fills per part.

·         The total overhead cost has been calculated as 1,200 BD per week.

·         The depreciation cost for equipment has been calculated as 30 BD per week.

a.       Determine the process capacity (number of components produced per week) of the entire process.

b.      Suppose a second shift of eight hours is run for assembly line 1 and the same is done for the final assembly line. In addition, four of the six drilling machines are made operational. The drilling machines, however, operate for just eight hours a day. What is the new process capacity (number of components produced per week)?

c.       Management decides to run a second shift of eight hours for assembly line 1 plus a second shift of only four hours for the final assembly line. Five of the six drilling machines operate for eight hours a day. What is the new capacity?

d.      Determine the cost per unit output for questions b and c.

Answer 1

Answer a:

No. of hours per day = 8; No. of days per week = 5

No. of hours per week = 8 x 5 = 40

Based on the information given in the question, we may represent the given process as mentioned in the below chart:

No. of components Processed in an Hour at assembly line 1 (Parts A and B) = 140 Units / Hr

No. of Components Processed in an Hour at Drilling Machine (Part C) = 50 x 3 drills = 150 Units / Hr

No. of Components Processed in the Final Assembly Line = 160 Units / Hr

So, the Bottleneck Station = Workstation processing the least no. of units/hr = Assembly Line

Therefore, Overall Process Capacity = Capacity of Bottleneck Station = 140 Units / Hr

Hence, Process Capacity Per Week =  140 x 40 = 5600 Units

Answer b:

We can find the new capacity at each of the workstations as mentioned in the below table:

Where Capacity / Week = Product of Col 2 to Col 7

So, the new overall process capacity = Capaacity at bottleneck (i.e., workstation havin the least no. processed of units) statiion = 8000 Components / Week

Answer c:

We will find the new capacity for each of the workstations as mentioned in the below table:

Where,

Col 8 = Total Hrs / Day = (Col 4 x Col 5) + (Col 6 x Col 7)

Col 10 = Capacity / Week = Col 2 x Col 3 x Col 8 x Col 9

So, the new overall process capacity = Capaacity at bottleneck (i.e., workstation havin the least no. processed of units) statiion = 9600 Components / Week

Answer d:

We will Calculate the cost per unit output for answers b and c as mentioned in the below table:

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