GOALS AND OBJECTIVE
S
To understand WHY it is important to understand operations to constrained
conditions.
To understand how the presence of internal and external constraints affect product
mix decisions
To understand the BASICS of the Theory of Constraints and how organizations
should respond to them in the short and long term.
To understand how these various conditions can be described in graphical form
TEXAS COMPANY
……
produces two models, Alpha and Gamma, using “Bob”, a new manufacturing process. Information regarding Alpha and Gamma is summarized in the following table:
ALPHA
GAMMA
Price per unit
$80
$60
Variable cost per unit
$50
$30
Amount of BOB processing time required per unit
6 hours
2 hours
BOB can only be used for 120 hours per week
. The Company has fixed costs of $720 per week
.
Required:
1.
Given the data above, assuming that there is no limit on the demand and that they can produce as much of either product as they wish, they should produce how much of each product?
-
Should produce 60 units of Gamma per week and 0 units of alpha (120/2)
2.
Assume the original 120-hour limit, but that there is a limited demand of 30 units of Gamma per week and 15 units of Alpha per week. How much of Alpha and Gamma should
they produce?
-
20hrs x $15 =300 per week -
4 wks x 300 =1,200
3.
The company has a contract with a customer who has a standing order for 11 units of Alpha per week which must be produced regardless. How much of each product should WALSH produce?
-
Number of units of Gamma = 30 units -
Number of units of Alpha= 10 (120 -60 =60/6)
4.
Assume the original situation
(that they can produce as much or little of either product
as they wish), and that they have chosen to produce ALL Gamma. Furthermore, assume that the company is operating at full capacity
. MARKOFF CORP. has approached the company and wishes to place an order for 5 units of Alpha. What is the minimum amount that they should charge? Why?
-
Number of units of Alpha=11 units -
Number of units of Gamma= 27 units ( 120 -66 =54 /2 =27 )
