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 | $ | 50 | $ | 54 | $ | 68 |
Direct materials | 10 | 11 | 12 | |||
Direct labor | 2 | 4 | 8 | |||
Variable manufacturing overhead | 4 | 4 | 4 | |||
Fixed manufacturing overhead | 9 | 9 | 9 | |||
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 | 25,000 | units |
Table C | 25,000 | 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 60,000 direct labor hours available, calculate the number of units of each table that Blossom should produce to maximize its profit.
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.