opm321

(1) Consider a small production system for manufacturing two products, X and Y as shown below. Manufacturing X requires two raw materials (RM 1 and 2). Manufacturing Y also requires two raw materials (RM 2 and 3). In addition, Y uses a purchased component that costs $10 per unit. Four work centers (A, B, C, and D) are used to manufacture the products. Each has 7,200 minutes (120 hours; 3-eight hour shifts) available each week. Operating expenses for the week, including everything except materials costs, is $12,000.

___________________________X Y_________

Demand per week 300 units 150 units

Selling price $180/unit $200/unit

Raw material costs (per unit)

RM 1 $40

RM 2 $40 $40

RM 3 $40

Purchased parts $10

Time available on each work center is 7,200 minutes.

(300 units) (150 units)

Prod. X Prod. Y

D (10 min) D (5 min)

Purchased Components ($10)

C (10 min) C (5 min) B (15 min)

A (15 min) B (15 min) A (10 min)

RM 1 ($40) RM 2 ($40) RM 3 ($40)

(a) What is the maximum potential profit of the production system?

1. Find the bottleneck work center. Show why it is a constraint.

1. What is the maximum feasible amount of profit subject to the constraint?

1. The manager plans to purchase a new technology at $750,000 to reduce the processing time on both RM 2 and RM 3 at the bottleneck workstation by half. What would you say about his plan? Discuss.