a. What steps can be taken to loosen the constraint in coating and sharpening?
- Adding the inspection station before the sharpening and coating so that valuable time is not wasted when working on defective units.
- Cross training workers can help out in coating and sharpening in other departments.
- Outsourcing the work that is being performed internally by sharpening and coating.
b. Consider Model C210 and Model D400 chisels. Which product should be emphasized if the constraint in coating and sharpening cannot be loosened?
The model C210 should be emphasized because it generates a higher contribution margin per unit of the constraint.
Model C210 Model D400
Contribution margin per unit $250.00 $430.00
Time in coating and sharpening .2 hours 0.8 hours
Contribution margin per hour $1,250.00 mce_markernbsp; $537.50
c. Focusing only on the Model C210 chisel and the model D400 chisel, what would be the benefit to the firm of gaining one more hour of production time in coating and sharpening?
According to the table below, Five Star Tools should produce Model C210 since it has a higher contribution margin per unit. This would also give the benefit of $250 x 5 = $1,250 since more production time in coating and sharpening would be spent on Model C210.
d. In coating and sharpening, the operator begins by inspecting items that have arrived from the chemical bath. If rough edges or blemishes are detected, the operator smooth's and/or buffs the items before actual coating or sharpening takes place. (Note that this process is in addition to the inspection that takes place at a separate inspection station following coating and sharpening.)
The average contribution margin per hour spent in the sharpening coating is $850. Given the inspection station that will save 240 hours which means that company generates additional $850 x 240 hours = $204,000 profit. It makes the point that companies generate large increment profits by loosening the constraints.