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A company makes 2 products, Product A and Product B. The product characteristics are shown in the following table.
Product
A
B
Price ($/unit)
$800
$1,000
Cost of materials ($/unit)
$200
$250
Cost of labor ($/unit)
$150
Market demand per week (units)
200
150
The products are fabricated and assembled in four different workstations (W, X, Y, Z). Every workstation is available for 60 hours a week and there is no setup time required when shifting from the production of 1 product to any other. The processing requirements to make one unit of every product are shown in the table.
Processing time (min/unit)
Workstation
Product A
Product B
W
8
12
X
9
Y
10
20
Z
5
a) Using the traditional method, which refers to maximizing the contribution margin per unit for every product, what is the optimal product mix and resulting profit?
b) Using the bottleneck method, which refers to maximizing the contribution margin per minute at the bottleneck for every product, what is the optimal product mix and resulting profit?
1/(1-z)(1-z)(1-z)(1-z)
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