Question

Exercise 4-50 Theory of Constraints (LO 4-5) Comp Desk, Inc., makes a single model of an ergonomic desk (with chair) for computer usage. The desk is manufactured in building 1. and the chair is manufactured in building 2. Monthly capacities and production levels are as follows: Building 1 {Desks) Building 2 (Chairs) 400 Monthly capacity Monthly production 500 400 400 The company will sell a desk only with a chair and can sell 500 desks per month. The units (desk with chair) sell for $330 each and have a variable cost of $135 each. Required: a. Is there a bottleneck at CompDesk in Building 1 or Building 2? Building 1 Building 2 b. CompDesk's production supervisors state they could increase building 1's capacity by 100 desks per month by producing desks on the weekend. Producing on the weekend would not affect the sales price, Variable cost per unit would increase by $35 for those produced on the weekend because of the premium paid to labor. Fixed costs would also increase by $22,000 per month. b-1. Calculate the differential operating profit (loss). (Losses and amounts to be deducted should be indicated with a minus sign.) Differential revenues Differential costs: Fixed Variable

Answer 1

PLO Annouro in beeilding 1 Beilding : at compiesk Is there a bottle-neck l Building 1 | because, The company will sell a desk only with a chalm and can sell soo desk por month thert means also 500 chairs a month and because berilding @ monthly copacity is only 400 desks which means 400 chines and desks could be produced however we can sell 500 desks and chairs thes building 1 (desky) is a boltene ek at compoksk. ine. $ 33.000 Dibberential value (330 xLoc) Daftential cost fixed wowable (135+135) x 100 I met sidsvetio) seating docs $99,000 $17,000 $6.000

b@ should comp Desk proderse desks on the weckend:- No] because, compdesk ine should not produce the desks as it is resulting in act operating Boss (done above) or $ 6,000 co $33,000 Differential rexenere (320 X 100) Differential cost fixed variable (135x100) I net operating profit $ 16.000 $13500 $ 3,500_ because; complesk should add equipment and workers to building 4. as it is resulting in net operating profit