The Southeast Manufacturing Company is producing two types of products: A and B.Demand forecasts for next year and other production-related information are provided in the following table: Both of these products are produced at the same workstation,called the Automatic Lathe.Currently,the company has 12 automatic lathes,and financial constraints prevent any expansion for the next year.It works 250 days per year with two 8-hour shifts and desires a 25 percent capacity cushion.Which one of the following alternatives will allow next year's demand to be fully covered?
A)Do nothing.
B)Increase the capacity cushion to 30 percent.
C)Increase the batch size of product B to 300 units.
D)Decrease the capacity cushion by 1 percent.

Question

The Southeast Manufacturing Company is producing two types of products: A and B.Demand forecasts for next year and other production-related information are provided in the following table:  Both of these products are produced at the same workstation,called the Automatic Lathe.Currently,the company has 12 automatic lathes,and financial constraints prevent any expansion for the next year.It works 250 days per year with two 8-hour shifts and desires a 25 percent capacity cushion.Which one of the following alternatives will allow next year's demand to be fully covered?
A)Do nothing. 
B)Increase the capacity cushion to 30 percent. 
C)Increase the batch size of product B to 300 units. 
D)Decrease the capacity cushion by 1 percent.

Quizplus · Accepted Answer

The total annual demand for Product A and Product B is 4,800 and 3,600 units respectively, which equals to 8,400 units. Current machine capacity, 12 automatic lathes, can produce 8,160 units (12 lathes * 2 shifts * 8 hours * 85% efficiency * 12 pieces per batch) with 250 days and 25% capacity cushion. This means that the current capacity is not enough to cover the total demand.

Option A (Do nothing) is not a valid choice as the current capacity cannot fully cover the demand. 
Option B (Increase the capacity cushion to 30 percent) will not make any significant difference in the production capacity, as increasing the cushion from 25% to 30% will only increase the production capacity to 8,424 units, which is still not enough to cover the total demand. 
Option D (Decrease the capacity cushion by 1 percent) will only decrease the cushion to 24%, which will reduce the safety margin and may lead to production disruptions.

Option C (Increase the batch size of Product B to 300 units) is the best choice for fully covering the demand. By increasing the batch size of Product B, the machine can produce 96 units per day (2 shifts * 8 hours * 85% efficiency * 300 pieces per batch) instead of 72 units per day (2 shifts * 8 hours * 85% efficiency * 200 pieces per batch). This will increase the total production capacity to 9,600 units, which is enough to cover the total demand of 8,400 units. Therefore, increasing the batch size of Product B is the best choice for fully covering the demand.

The Southeast Manufacturing Company Is Producing Two Types of Products