Exam 19: Cost Management: Quality, Time, and the Theory of Constraints

Canevil Unlimited makes small motorcycles. The monthly demand ranges from 80 to 100 motorcycles. The average demand is 92 motorcycles. The plant operates 300 hours a month. Each cycle takes approximately 1.5 hours. If the company adds a new line of scooters, initial demand will be 20 per month. Each scooter will take 1 hour to make. To offset approaching production capacity, expanding the assembly line is possible. This will decrease manufacturing time for all products by 20 percent. However, this will increase the costs of cycles from $400 to $500 and scooters from $200 to $240. The change will also cause increases in prices from $700 to $750 for cycles and from $450 to $500 for scooters. Required: a. What is the average waiting time for cycles if they are the only item manufactured? b. What is the average waiting time if both cycles and scooters are produced and the assembly line is not enlarged? c. What is the average waiting time if both cycles and scooters are produced and the assembly line is enlarged? d. What is the expected monthly margin without scooters if the company sells all 92 cycles it manufactures? e. What are the expected monthly contribution margins if scooters are made with the current assembly line and with the new assembly line? Assume average sales and that sales equal production. f. What action do you recommend?

A machine has been identified as a bottleneck and the source of the constraint for a manufacturing company that has multiple products and multiple machines. Discuss ways the company can overcome the bottleneck.

A nonlinear cost function

A learning curve is a function

A Pareto Diagram is usually in a bar-chart format, and it shows how often a particular problem has occurred.

The demand for Ballard's Glass Company's products varies, ranging from 10 to 20 windows a day with an average of 15. John Ballard works eight hours a day, five days a week. Each order is one window, and each window takes 26 minutes to install. What is the average waiting time in minutes?

Brown Laundry has a variable demand. The daily demand ranges from 100 to 140 customers a day with an average of 5 items. The average daily demand is 110 customers. The laundry operates 10 hours a day. Each order takes approximately 5 minutes. Required: a. What is the average customer waiting time in minutes? b. What is the cycle time for an order? c. The manager has decided that the waiting time is too long and has increased the work day to 11 hours. What is the waiting time now? Will the customers be any happier?

Andrew Pallet Co., Inc. manufactures pallets for various manufacturing companies. Each new employee takes 10 hours to make the first pallet and 8 hours to make the second. The manufacturing overhead charge per hour is $80. Required: a. What is the learning curve percentage assuming the cumulative average method? b. What is the time needed to build 8 pallets by a new employee using the cumulative average-time method? Assume the rate of learning factor is -0.1520. c. What is the time needed to produce the 16th pallet by a new employee using the incremental unit-time method? Assume the rate of learning factor is -0.3219.

A cause-and-effect diagram is used to help identify potential causes of failure or defects.

On-time performance is

How much will appraisal costs change assuming the new prevention methods reduce the amount of material failures during the appraisal phase by 40 percent?

Quick Shop Printing has two workstations, cutting and pasting. The cutting station is limited by the speed of operating the cutting machine. Pasting is limited by the speed of the workers. Pasting normally waits on work from cutting. Each department works an eight-hour day. If cutting begins work two hours earlier than pasting each day, the two departments generally finish their work at about the same time. Not only does this eliminate the bottleneck, but it increases finished units produced each day by 80 units. All units produced can be sold even though the change increases inventory stock by 10 percent from 200 units. The cost of operating the cutting department two more hours each day is $800. The contribution margin of the finished products is $3 each. Inventory carrying costs are $0.20 per unit per day. What is the change in the daily contribution margin if the change is made?

Which of the following is NOT a key step in managing bottleneck resources?

Quality of design measures

Harry's Picture manufactures various picture frames. Each new employee takes 5 hours to make the first picture frame and 4 hours to make the second. The manufacturing overhead charge per hour is $20. Required: a. What is the learning-curve percentage, assuming the cumulative average method? b. What is the time needed to build 8 picture frames by a new employee using the cumulative average-time method? Assume the rate of learning factor is -0.1520. c. What is the time needed to produce the 16th frame by a new employee using the incremental unit-time method? Assume the rate of learning factor is -0.3219.

The International Standards Organization (ISO) certification registers companies that conform to a specific level of quality.

A company would subordinate all bottleneck production to non-bottleneck machines when

To complete the first setup on a new machine took an employee 200 minutes. Using an 80% cumulative average-time learning curve indicates that the second setup on the new machine is expected to take

Discuss how a manufacturer of personal computers such as Dell Computer can benefit from the introduction of a quality improvement program.

A learning curve is a function that measures how labour-hours per unit decrease, as units of production increase.