Question

2. A manufacturer of vacuum cleaners produces three models of canister-style vacuum cleaners-the X-100, X-200, and X-300-on a production line with three stations-motor assembly, final assembly, and test. The line is highly automated and is run by three operators, one for each station. Data on production times, material cost, sales price, and bounds on demand are given in the following tables: Product Material Cost ($/Unit) Price $/Unit) Minimum Demand Maximum Demand (Units per Month) (Units per Month) 80 350 750 X-100 X-200 X-300 500 150 160 1,500 500 300 620 Product Motor Assembly (Minimum per Unit) Final Assembly (Minimum per Unit) Test (Minimum per Unit) X-100 X-200 X-300 12 Labor costs $20 per hour (including benefits), and overhead for the line is $460,000 per month. The current production plan calls for production of X-100, X-200, and X-300 to be 625, 500, and 300 units per month, respectively. (a) What is the monthly profit that results from the current production plan i.e., sales revenue minus labor cost minus material cost minus overhead)? (b) Estimate the profit per unit of each model, using direct labor hours to allocate the overhead cost per month. Which product appears most profitable? Is the current production plan consistent with these estimates? If not, propose an alternative production plan and compute its monthly profit.

its in hours

Answer 1

(a)

Calculation of Monthly profit from current production Plan
	X-100	X-200	X-300	Total
Sales (A)	218750	250000	186000	654750
Exepnses :-
Material cost	50000	75000	48000	173000
labour cost	362500	330000	300000	992500
Overhead				460000
Total (B)				1625500
Net Profit/loss (A-B)				-970750

If we consider the current production Plan,there is a loss of$ 970750.

Working notes:-

• It is assumed that the assmbly and testing hours are given on hours per unit.
• sales

	X-100	X-200	X-300
Units	625	500	300
sales	350	500	620
	218750	250000	186000

• Material cost

	X-100	X-200	X-300
units	625	500	300
material	80	150	160
	50000	75000	48000

• Labour cost

	Motor assembly	final assembly	Test	total hrs	per hour rate	Total hr *per hr rate	No of units
X-100	8	9	12	29	20	580	625	362500
X-200	14	12	7	33	20	660	500	330000
X-300	20	16	14	50	20	1000	300	300000

(b) Profit per unit

Profit per hr of each unit
	X-100	X-200	X-300
Price	350	500	620
Material	80	150	160
Labour cost	580	660	1000

Since question is not clear on the hours worked in a month or time taken to manufacture each unit,it is difficult to provide further solution.

Kindly provide the details,so that question can be solved completely.