Atlas Inc. is a toy bicycle manufacturing company producing a five-inch small version of the bike…
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Question “Atlas Inc. is a toy bicycle manufacturing company producing a five-inch small version of the bike…”
Atlas Inc. is a toy bicycle manufacturing company producing a
five-inch small version of the bike that Lance Armstrong rode to
win his first Tour de France. The assembly line at Atlas Inc.
consists of seven work stations, each performing a single step.
Stations and processing times are summarized here:
Step 1 (30 sec.): The plastic tube for the frame is cut to
size.
Step 2 (20 sec.): The tube is put together.
Step 3 (35 sec.): The frame is glued together.
Step 4 (25 sec.): The frame is cleaned.
Step 5 (30 sec.): Paint is sprayed onto the frame.
Step 6 (45 sec.): Wheels are assembled.
Step 7 (40 sec.): All other parts are assembled to the
frame.
Under the current process layout, workers are allocated to the
stations as shown here:
Worker 1: Steps 1 and 2
Worker 2: Steps 3 and 4
Worker 3: Step 5
Worker 4: Step 6
Worker 5: Step 7
Assume the workers are paid $15 per hour. Each bicycle is sold
for $6 and includes parts that are sourced for $1. The company has
fixed costs of $200 per hour. Despite Lance Armstrong’s doping
confession, there exists substantially more demand for the bicycle
than Atlas can supply.
Instructions: Round all answers to 2
decimal places.
a.
What is the cost of direct labor for
the bicycle?
per unit
b.
How much profit does the company make
per hour?
per hour
c.
What would be the profits per hour if
Atlas would be able to source the parts 10 percent cheaper ($0.90
for the parts of one unit)?
per hour
d.
What would be the profits per hour if
Atlas were able to reduce fixed costs by 10 percent (to $180 per
hour)?
per hour
e.
What would be the profits per hour if
Atlas were able to reduce the processing time at the bottleneck by
5 seconds per unit (assume unlimited demand)?
per hour
Answer
In a step-by-step process, the parts of the problem are presented in the above-handwritten document. The solution shows all calculations.
A bottleneck is when there are work-in-progress products that remain before the process can be completed. This is because worker 2 takes longer than the other workers and it is the bottleneck. It will determine the plant’s total capacity.
sosed Totor strat Step1 – 30sec I worker 1 Step 2 – 20sec Step 3 – 35suz Step 4 – assect “I workers & bosec Worker fees = $15/hr tep5-30 sec workers zoser selling price: $6/unit stept – 45 sec worker 4 – ussee parts 41 per unit Step 7-40sec workers uose Fixed cost = $200/hr Capacity of Hu production linu in finished unitsin Procusing capacity – Min & capacity stan.|Sosed Totor strat Step1- 30sec I worker 1Step 2 – 20sec Step3 – 35suz 4 – assect “I” workers & bosec Workers fees = $15/hr Tep5-30 sec workers zoser selling cost: $6/unit Stept 41sec worker 4 ussee parts 41/unit Step 7-40sec workers fixed cost = $200/hr Hu production linu capacity in finished unitsin Procusing capacity-Min & capacity stan.} WI= I for W2 = 12 7 23 = 1. We are the bottleneck in this process. (smal capacity in one hour= I x360- 60 units ar at Cost of direct labor Cost of direct labor/hr = $1555 = $75/ur labor cost/unit = wages/hour production per hour 2-7-5 $1.25/imit 6 Total cost to company in an hour Fixed cost & Labor costs + parts cost & 75+60 = $335/hour total sales = $6X60 = $360/hour protit/hour – 360-335 25, 25 per hour
@ lf parts costs are reduced to 40.goper units fixedo total cost decreases by $6 to. 390-340 etnog – $50/her heslo trasban
Conclusion
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