Question

Blossom, Inc., is a small company that manufactures three versions of patio tables. Unit information for its products follows:     

		Table A		Table B		Table C
Sales price		$	40	$	44	$	58
Direct materials			6		7		8
Direct labor			1		3		7
Variable manufacturing overhead			2		2		2
Fixed manufacturing overhead			5		5		5
Required number of labor hours			0.5		0.5		1.0
Required number of machine hours			4.0		2.50		2.0

Blossom has determined that it can sell a limited number of each table in the upcoming year. Expected demand for each model follows:

Table A	50,000	units
Table B	20,000	units
Table C	30,000	units

Required:
1. Suppose that direct labor hours has been identified as the bottleneck resource. Determine how Blossom should prioritize production by rank ordering the products from 1 to 3.



2. If Blossom has only 40,000 direct labor hours available, calculate the number of units of each table that Blossom should produce to maximize its profit. (Enter the products in the sequence of their preferences; the product with first preference should be entered first.)



3. Suppose that the number of machine hours has been identified as the most constrained resource. Determine how Blossom should prioritize production by rank ordering the products from 1 to 3.



4. If Blossom has only 232,000 machine hours available, calculate the number of units of each table that Blossom should produce to maximize its profit. (Enter the products in the sequence of their preferences; the product with first preference should be entered first.)

Answer 1

Answer 1 & 2 - Direct Labour Hours is bottleneck

	Table A	Table B	Table C
Selling Price	40	44	58
Direct Material	6	7	8
Direct Labour	1	3	7
Variable Mfg. Overhead	2	2	2
Contribution Margin	31	32	41
Direct Labour Hours per unit	0.50	0.50	1.00
Contribution per Direct Labour Hour	62.00	64.00	41.00
Ranking of Production	2nd	1st	3rd
Maximum Demand (in Units)	50,000	20,000	30,000
Total Direct Labour Hours Required	25,000	10,000	30,000
Total Direct Labour Hours allocated	25,000	10,000	5,000
Total Units to be produced	50,000	20,000	5,000

Answer 3 & 4 - Machine Hours is Bottleneck

	Table A	Table B	Table C
Selling Price	40	44	58
Direct Material	6	7	8
Direct Labour	1	3	7
Variable Mfg. Overhead	2	2	2
Contribution Margin	31	32	41
Machine Hours Per unit	4	2.5	2
Contribution per Direct Labour Hour	7.75	12.80	20.50
Ranking of Production	3rd	2nd	1st
Maximum Demand (in Units)	50,000	20,000	30,000
Total Machine Hours Required	2,00,000	50,000	60,000
Total Direct Labour Hours allocated	122000	50000	60000
Total Units to be produced	30,500	20,000	30,000