Theory of Constraints Bakker Industries sells three products (611, 613, and 615) that it manufac- tures in four departments. Both labor and machine time are applied to products in each of the four departments. The machine-processing and labor skills required in each department prohibit switch- ing either machines or labor from one department to another. However, Bakker has a good supply of both full-time and part-time labor and does not expect hiring or retention of employees to be a problem. Because of the availability of part-time labor, Bakker considers labor a variable cost and includes it in the calculation of throughput margin.
Bakker's management is planning its production schedule for the next several months. Some machines will be out of service for extensive overhauling. Available machine times by department for each of the next six months are as follows:
|
Department
|
1
|
2
|
3
|
4
|
|
Normal machine capacity in machine-hours
|
3,500
|
3,500
|
3,000
|
3,500
|
|
Capacity of machines being repaired, in machine-hours
|
500
|
400
|
300
|
200
|
|
Available capacity in machine-hours
|
3,000
|
3,100
|
2,700
|
3,300
|
Labor and machine specifications per unit of product follow:
|
Product
|
Labor and Machine Time
|
1
|
2
|
3
|
4
|
|
611
|
Direct labor-hours
|
2
|
3
|
3
|
1
|
|
Machine-hours
|
2
|
1
|
2
|
2
|
|
613
|
Direct labor-hours
|
1
|
2
|
0
|
2
|
|
Machine-hours
|
1
|
1
|
0
|
2
|
|
615
|
Direct labor-hours
|
2
|
2
|
1
|
1
|
|
Machine-hours
|
2
|
2
|
1
|
1
|
The Sales Department's forecast of product demand over the next six months is as follows:
Product Monthly Sales
611 500 units
613 400 units
615 1,000 units
Bakker's inventory levels will not increase or decrease during the next six months. The unit price and cost data valid for the next six months follow:
|
Product
|
611
|
613
|
615
|
|
Price
|
$196
|
$123
|
$167
|
|
Direct materials
|
7
|
13
|
17
|
|
Direct labor
|
|
|
|
Department 1
|
12
|
6
|
12
|
|
Department 2
|
21
|
14
|
14
|
|
Department 3
|
24
|
-
|
16
|
|
Department 4
|
9
|
18
|
9
|
|
Variable overhead
|
27
|
20
|
25
|
|
Fixed overhead
|
15
|
10
|
32
|
|
Variable selling
|
3
|
2
|
4
|
Required
1. Determine whether Bakker can meet the monthly sales demand for the three products. What department is a constraint, if any?
2. What monthly production schedule would be best for Bakker Industries? Assume that Bakker includes all variable manufacturing costs in calculating throughput.