Question

Atlas Inc. Is a toy bicycle manufacturing company producing a five-inch small version of the bike that Lance Armstrong rode to wiin his first Tour de France. The assembly line at Atlas Inc. consists of seven work stations, each performing a single step. Stations and processing times are summarized here: Step 1 (35 sec.): The plastic tube for the frame is cut to size. Step 2 (20 sec ): The tube is put together Step 3 (40 sec.): The frame Is glued together Step 4 (25 sec): The frame is cleaned. Step 5 (35 sec): Paint is sprayed onto the frame. Step 6 (45 sec): Wheels are assembled. Step 7 (45 sec): All other parts are assembled to the frame. Under the current process layout, workers are allocated to the statlons as shown here: Worker 1: Steps 1 and 2 Worker 2: Steps 3 and 4 Worker 3: Step 5 Worker 4: Step 6 .Worker 5: Step 7 es Assume the workers are pald $20 per hour. Each bicycle Is sold for $5 and Includes parts that are sourced for $1. The company has fixed costs of $100 per hour. Despite Lance Armstrong's doping confession, there exists substantially more demand for the bicycle than Atlas can supply. Instructions: Round all answers to 2 decimal places. What is the cost of direct labor for the bicycle? per unit a. How much profit does the company make per b. hour? per hour What would be the profits per hour if Atlas c. would be able to source the parts 8 percent cheaper ($0.92 for the parts of one unit)? per hour What would be the profits per hour if Atlas d. were able to reduce fixed costs by 12 percent (to $88 per hour)? per hour e. What would be the profits per hour if Atlas were able to reduce the processing time at per hour the bottleneck by 6 seconds per unit (assume unlimited demand)?

Answer 1

Answer:

A) $1.806 per unit

B) $22.32  per hour

C) $28.95  per hour

D) $43.31  per hour

E) $62.41 per hour

Explanation:

Capacity of worker 1 = 1/55

Capacity of worker 2 = 1/65

Capacity of worker 3 = 1/35

Capacity of worker 4 = 1/45

Capacity of worker 5 = 1/45

 

(a)

Cost of direct labor = Wages per hour / Flow rate per hour = $20*5 / 55.38 = 1.806 per unit

(b)

Profit per hour = Flow rate * (Selling price - Part cost) - Wages per hour - Fixed cost per hour

= 55.38*(7 - 1) - 20*5 - 210

= 22.32

(c)

Profit = 55.38*(7 - 0.88) - 20*5 - 210 = 28.95

(d)

Profit = 55.38*(7 - 1) - 20*5 - 189 = 43.31

(e)

Capacity = 3600 / (65 - 7) = 62.07 per hour

Flow rate = Min{Capacity, Demand} = Min(62.07, Inf) = 62.07 per hour

Profit = 62.07*(7 - 1) - 20*5 - 210 = 62.41