Avocado Ltd produces small electronic components for kitchen appliances.Two of its products are Component Y and Component Z.The selling price of Component Y is $15,and the selling price of Component Z is $20.The variable cost per unit for Component Y is $8 and the variable cost per unit of Component Z is $11.The machine hour requirement and demand for the two products are:
Both Component Y and Component X have to undergo the machining process first,followed by a manual polishing labour process.Avocado Ltd's capacity is 6500 machine hours and 6500 labour hours.The top priority of Avocado Ltd in terms of managing constraints is:

Question

Quizplus · Accepted Answer

The constraint for Avocado Ltd is the limited capacity of machine hours and labour hours. Therefore, the best choice is to invest in additional machines to increase the capacity and production of both Component Y and Component Z. Increasing demand for Component Z or lowering the price of Component Y may lead to more sales, but it may also increase the strain on the company's limited resources, ultimately exacerbating the capacity constraint. Training employees to improve productivity in relation to polishing may also help but would not be as effective in increasing capacity as investing in additional machines.

Avocado Ltd Produces Small Electronic Components for Kitchen Appliances