Week 3 Workshop Exercise Solutions

# Week 3 Workshop Exercise Solutions - Week 3 Workshop...

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Week 3 Workshop Exercise Solutions EXERCISE 16.29 (15 minutes) Life cycle management and target costing: manufacturer 1 The cost for XRP to remain competitive and meet the requirements of Solarcare’s parent company would be 72 cents per unit. target selling price to remain competitive = \$1.50 – (\$1.50 x 20%) = \$1.20 target cost to achieve a 40 per cent return on sales = \$1.20 × (1 – 0.40) = \$0.72 2 Solarcare could examine the distribution of expected costs over the remainder of XRP’s life cycle. The aim should be to examine each stage of the life cycle, to identify ways in which non- value-added activities can be removed. It may be possible to spend more money in the design phase and reduce costs in subsequent stages, such as manufacturing costs, or customer warranty claims. It may also be feasible to spend more money during manufacturing, for example, to improve quality, and reduce subsequent costs, such as customer warranty claims. 3 Solarcare could use value engineering to achieve the target cost while maintaining or increasing customer value. For example, in applying value engineering, the design team at Solarcare could substitute a more cost-effective material for the XRP Lens or improve the efficiency of the production processes. EXERCISE 16.30 (15 minutes) The theory of constraints: manufacturer This question shows the importance of identifying constraints (or bottlenecks) and removing them to improve the overall rate of production, or throughput. Improvements in non-bottleneck areas will not increase the rate of output. 1 Current output is 35 units per hour. Throughput after efficiency drive in department B is 52.5 units per hour (35 units plus 50 per cent improvement). Support proposal. 2 Current output is 60 units per hour. Throughput after efficiency drive is still 60 units per hour. Efficiency drive in department B does not improve throughput. It would be better to increase efficiency in department A. 3 Current output is 50 units per hour. Throughput after efficiency drive is still 50 units per hour. Efficiency drive in department B does not improve throughput. It would be better to increase efficiency in department C. EXERCISE 16.32 (30 minutes) Cost of quality report: manufacturer 1 Hills Metals Ltd Quality cost report for the month of April Current month’s Percentage cost of total Internal failure costs: Cost of faulty goods that are scrapped \$4 200 18.6

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