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Question - The senior management at Canine Kernels Company (CKC) is concerned with the existing capacity limitation, so they want to accept the mix of orders that maximizes the company's profits. Traditionally, CKC utilizes a highest contribuition margin method, whereby decisions are made to produce as much of the product with the highest profit margin as possible, followed by the next highest profit margin product, and so on until no more capacity is available. Because capacity is limited, choosing the proper product mix is cruicial. Troy Hendrix, the newly hired production supervisor, is an avid follower of teh theory of constrainst philoposhy and bottleneck based scheduling. He believes that profitability can indeed be approved if bottleneck resources are exploited to determine the product mix.
a. What is the profit if the traditional profit margin method is used for determining CKC's product mix?
b. What is the profit if the bottleneck based approach advocated by Troy is used for selecting the product mix?
c. Calculate the profit gain, both in absolute dollors as well as in terms of percentage gains, by using TOC principles for determining product mix.
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