| Stephanie Gedjeyan |
| Taylor's Tailors Case | Stephanie Gedjeyan |
| WMBA 501 | WMBA 501 |
| | Taylor's Tailors-Draft 2 |
| | 23-Nov-16 |
| | 1) |
| | | | | | VOH rate/DLC |
| | Table 1 | | | | 200% |
| | V Costs | Suits | Pants | Sports coats |
| | DM | $ 18.00 | $ 6.00 | $ 8.00 | Products in order of descending profitability: | | | Suits, Sports Coats, Pants |
| | DL | $ 40.00 | $ 10.00 | $ 19.00 | Most profitable to produce: | | | Suits |
| | VOH | $ 80.00 | $ 20.00 | $ 38.00 |
| | TVC | $ 138.00 | $ 36.00 | $ 65.00 |
| | Price | $ 235.00 | $ 60.00 | $ 135.00 |
| | CMu | $ 97.00 | $ 24.00 | $ 70.00 |
| | 2) |
| | V Costs | Sports coats | Pants | Suits |
| | DM | $ 8.00 | $ 6.00 | $ 18.00 |
| | DL | $ 19.00 | $ 10.00 | $ 40.00 | VOH rate/DLC |
| | VOH | $ 38.00 | $ 20.00 | $ 80.00 | 200% |
| | TVC | $ 65.00 | $ 36.00 | $ 138.00 |
| | Price | $ 135.00 | $ 60.00 | $ 235.00 |
| | CMu | $ 14.00 | $ 12.00 | $ 10.78 | Capacity/MH |
| | MHu | 5 | 2 | 9 | 30,000 |
| | Current Sales Mix | | | | Utilization/MH |
| | Units | 1,000 | 5,000 | 2,000 |
| | Total Resource Requirement | 9000 | 10000 | 10000 | 29000 |
| | | | | | Excess Capacity/MH |
| | | | | | 1,000 |
| | For this reason, the excess capacity of units should be used to produce 200 units of Sports Coats, since the coats generate the highest additional contribution. |
| | 3) |
| | Minimum Cost Accepable (sum of VC) | | $ 65.00 |
| | 4) |
| | Overtime Working | | | Per Unit Cost for Overtime units |
| | Total Units | 300 | | DM | 8 |
| | Excess Capacity | 200 | | DL | 28.5 |
| | Over time | 100 | | VOH | 57 |
| | | | | Per Unit Cost | 93.5 |
| | Overtime |
| | Sales | $ 36,000.00 |
| | Cost of Sales |
| | 200 Units | $ 13,000.00 |
| | 100 Units | $ 9,350.00 | | Profit is higher when using overtime, therefore overtime should be utilized to complete the order. |
| | Cost of Sales | $ 22,350.00 | | $ 13,650.00 | > | $ 9,500.00 |
| | Profit | $ 13,650.00 |
| | Current Capacity |
| | Sales | $ 36,000.00 |
| | Less Contribution Lost | $ 7,000.00 |
| | Less Cost of Sales |
| | 200 Units | $ 13,000.00 |
| | 100 Units | $ 6,500.00 |
| | Profit | $ 9,500.00 |
| | In this scenario, the important economic concept that must be considered is opportunity cost. |
| | 5) |
| | The reason why fixed costs are ignored in this problem is because they remain unchanged. For this reason, they are not relevant in this problem when accepting or rejecting a special order. |
Leila@
taylors_tailors_case.xlsx
