Ch7-RISK MGT_PracticeProblems_Keys.docx - Ch7 3 CKC Station...

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Ch7 3. CKC Station X is the bottleneck – 2600 minutes Work Station Product A Product B Total Load W 10*90=900 14*85=1190 2090 X 10*90=900 20*85=1700 2600 Y 15*90=1350 11*85=935 2285 4. CKC a. Traditional Method: Product B has the higher contribution margin/unit Product A Product B Price 55.00 65.00 Raw and Purchased Parts 5.00 10.00 Contribution Margin 50.00 55.00 Work Station Minutes at Start Mins. Left after Making 85 Bs Mins. Left after Making 90 As Can Only Make 70 As W 2400 1210 310 X 2400 700 700/10 = 70 Y 2400 1465 115 85 units of B and 70 units of A (Product B will use 1700 minutes at station X leaving 700 for Product A. Product Overhead Raw Mat’l Labor Purchase Parts Total Costs Revenues A 70 x 2 =140 70 x 3 = 210 70 x $55 = 3850 B 85 x 5 = 425 85 x 5 = 425 85 x $65 = 5525 Totals 3500 565 3 x $6 x 40 hrs = 720 635 5420 9375 Revenue – costs = profit $9,375 - $5,420 = $3,955 b. Bottleneck-based approach: Product A has the higher contribution margin/unit at the bottleneck Product A Product B Margin 50.00 55.00 Time at bottleneck 10 min 20 min
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Contribution margin per minute 5.00 2.75 Work Station Minutes at Start Mins. Left after Making 90 As Mins. Left after Making 85 Bs
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