11) List and describe the three measures defined by the theory of constraint.
12) What steps can managers take to manage bottlenecks and maximize operations at an organization?
13) The Stratford Elite Manufacturing Company cuts and sews insulated curtains. The facility has two workstations to permit managers to cut and finish the product. The manager reported that the cutting station must wait to receive fabric because they wait for the cut fabric from the workers at the cutting machine. The manger determined that the finishing workstation is constrained by the speed of production by the workers at the cutting workstation, based on an eight-hour day.
To eliminate the bottleneck constraint, the employees at the finishing workstation could begin the cutting process two hours earlier each day, compared to the workers at the cutting workstation, because they each complete their work at the same time. The manager realized that this eliminates the bottleneck constraint, but it also increases the amount of finished units produced each day by 175 units. All of the units produced can be sold even though the change resulted in an increase in the inventory stock by 25%, up from 425 units.
The managerial accountant reported that the cost of operating the cutting department an additional two hours each day is $1,750 and the contribution margin of the finished products are $7 each. The inventory carrying costs are $.50 per unit, per day.
Compute the total production per day in units if the workers at the Finishing workstation work an additional two hours each day at Stratford Elite Manufacturing. What is the net change in the contribution margin if the manager at Stratford Elite Manufacturing makes the change?
A) 675 units; $3,008.25
B) 700 units; $3,012.75
C) 750 units; $3,016.45
D) 875 units; $3,018.75
E) 925 units; $3,022.65
14) The Hobby Shop, a manufacturer of toy airplanes, experienced a slow work process at the plant in Norfolk, Virginia. The setup time at one of the workstations was slow compared to the other workstation. An employee reported this issue to the floor manager. The manager proposed a plan to reduce the setup time, but it will cost $75,000. The change is expected to produce an additional 8,200 planes. The managerial accountant reported the following information:
Selling price per plane $20
Direct labor cost per plane$3.50
Direct material cost per plane$5.50
Compute the increase in the throughput contribution:
15) Motorcycle Production Services produces miniature motorcycles. The company has two departments, the painting department and the sanding department. The painting department is constrained by the speed of the employees that operate the sanding machines. The employees that work in painting always receive late work from the employees in the sanding department.
Each employee works a seven-hour day. To relieve the bottleneck constraint, the manager at Motorcycle Production Services believes they can add an additional half-day shift to the sanding department. The manager believes they can begin work three and one-half hours earlier than the employees in the painting department, and all employees in each department can end their workday at the same time.
The manager expects to increase finished units produced each day by 180 units. All units produced can be sold and the managerial accountant reported that the cost of an increase in operating the sanding department by three and one-half hours each day is $1,400 and the contribution margin of the finished products is $12 each. Inventory carrying cost is $0.45 per day.
What is the total production per day if the manager adds the extra shift? Compute the change in the daily contribution margin if the manager implements the change.
A) 540.01; $3,583.14
B) 550.05; $3,683.14
C) 560.10; $3,783.14
D) 570.15; $3,883.14
E) 580.25; $3,993.14