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Category > Management Posted 17 Feb 2018 My Price 8.00

Auburn Foods

Throughput contribution. Auburn Foods produces frozen meals aimed at the college student market. The production takes place in four stages: Preparation, in which the food is cleaned and cut; Cooking; Freezing; and Packaging. The company has a bottleneck in the Preparation stage, as shown below. Each ‘‘unit’’ refers to a container of 144 frozen meals.

 

Preparation

Cooking

Freezing

Packaging

Hourly Capacity

Actual Hourly Production

300 Units

300 Units

312 Units

300 Units

320 Units

300 Units

340 Units

300 Units

Each unit sells for $200 and has a variable cost of $120.

Option a. Auburn can increase Preparation output by renting additional equipment that would cost $200 per hour and increase the hourly capacity in Preparation by 5 units.

Option b. Auburn can pay its suppliers to perform some of the food preparation. This option would cost Auburn $2 more per unit and would enable the company to increase its hourly output in Preparation by 10 units.

Auburn can take either or both options as presented. If both options are taken, the cost increase in Option b would apply to 310 units. What do you recommend?

Answers

Maurice Tutor
(5)
Status NEW Posted 17 Feb 2018 10:02 PM My Price 8.00

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