MBPF Inc. produces and sells garages to consumers. MBPF’s manufacturing process consists of recurring and identical prod

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MBPF Inc. produces and sells garages to consumers. MBPF’s
manufacturing process consists of recurring and identical
production/demand cycles of 8 weeks. The consumer demand of garages
during the next 8 weeks is estimated by the marketing department
and summarized in the following table.
Let Availability=Production + Inventory. Then, Sales
Quantity = Demand if Demand<Availability. Otherwise, Sales
Quantity = Availability if Demand > Availability. If
availability exceed demand, inventory will build up. An inventory
unit will cost the company Unit Inventory Cost=$10 per week (For
example, If MBPF keeps 4 units of inventory for 2 weeks, then the
Inventory Cost = 4units´2weeks´$10). At the beginning of week 1 (or
end of week 0) MBPF has 500 units of garage inventories in the
storeroom.
Week
1
2
3
4
5
6
7
8
Demand
1600
1400
900
1300
1300
1300
800
900
Assembly of a garage is currently performed by three resources:
Machine, Team 1, and Team 2. Machine prepares part Roof (involves
activities E and G), Team 1 prepares part Base-a (Activities A and
B), and Team 2 prepares part Base-b (Activities C, D, and F). MBPF
has 5 units of Machine. Team 1 has 6 team members and Team 2 has 5
team members. Each member of Team 1 and Team 2 is paid $8 per hour.
Maintenance, utility, and depreciation costs for each machine add
up to $40 per hour. Contribution margin of each unit of garage is
$30 (Price-Material cost). Assume that each resource of MBPF works
40 hours = 2400 minutes (scheduled availability) per week. Work
contents (minutes) are summarized in the following tables.
Activities
Work Contents (minutes)
Resources
A
6
Team 1
B
2
Team 1
C
1
Team 2
D
3
Team 2
E
8
Machine
F
1
Team 2
G
2
Machine
(a) Evaluate the production process and
determine the Total Profit Per 8 weeks Cycle (TPPC). Note that
TPPC = (Contribution Margin - Inventory Cost-Machine Cost-Teams
1 and 2 Costs)
(b) MBPF is evaluating the option of
placing an advertisement in the local newspaper so that weekly
demand can be increased by 100 units (for example, week 1 demand
1600è1700, week2 demand 1400è1500,…). MBPF will put the
advertisement in the newspaper if the weekly advertisement fee is
lower than $X (assuming costs are spread out evenly during the
8-week periods). Determine X. Explain why?
(C) MBPF is evaluating the option of
buying a new machine. Will MBPF purchase a new machine? If your
answer is Yes, then MBPF will
buy it if it costs less than $X. If your answer
is No, then explain why?