Rafiq Doun-Naah
Jayeon Hwang
Patrick O'Connor
Ke Ma
Story:
Constraint Cannot be Loosened?
The below calculation shows that Model C210 provide the larger contribution margin in relation to the constrained resource. Therefore, Model C210 should be emphasized.
Constraint Cannot be Loosened?
Below calculation shows Model C210 is more profitable than Model D400. Suppose four hour can be used to make either 20 Model C210 chisels (240min/12min) or 5 Model D400 chisels (240min/48).
Because the additional contribution margin for Model C210 is much larger, this model makes the most profitable use of the company’s constrained resource - coating and sharpening.
of Production Time in Coating and Sharpening
As can be seen from the above figures, if the firm gains one (1) more hour in coating and sharpening, it will produce five (5) more units of model C210 and 1.25 more units of Model D400. This will bring in an additional $1,250 margin for producing Model C210 chisels and $538 total contribution margin for Model D400. Because these additional units do not incur additional fixed costs, the firm’s net profit will increase by $1,788.
Associated with Adding the New Inspection Station
New station will free up 5 minutes per hour
multiplied by 8 hours per day
multiplied by 360 operation days