ATTENTION: MR. IAN BROWN, PRODUCTION MANAGER

This report covers the following topics:

A monthly production schedule/plan for two machines working independently for the months of June, July, and August.

Evaluation and consideration of a product mix that contributes to the firm’s cost-cutting agenda

An analysis of what might happen if machine working hours vary.

Future estimates and actions to ensure that activities continue to run smoothly

Introduction\Background

Mojo Plastics Company sought our professional guidance on a specific line of manufacturing in wastepaper bins due to our skill and dependability at C.A. Head Management Consultants.

Data and information that are available

Information supplied relates to the following:

The two types of wastepaper bins dealt in (Style 12 and Style 20) together with their selling prices per unit

Monthly demand schedules to be delivered timely

Limitations/constraints pertaining:

Maximum working hours allocated to each machine per month

Storage space shortage in the company premises

Cost aspects of cost including labor, supervision and overheads, material costs, packaging and transportation as well as storage costs

Calculations involved

For the two types of wastepaper bins, data on production schedules will be shown in tables. This data will be part (not whole) of computations in the appendices. Suggested solutions and courses of action will be together with the answer and sensitivity analysis.

Results and recommendations

From our analysis, recommendation on the production schedule for the three months is shown in the tables below:

Optimal production from excel

JUNE

Style 19

Style 20

Hours utilized

Avis

3000

2000

650

Burns

4000

3000

1250

Total

7000

5000

1900

Required

3000

2000

Excess

4000

3000

Table 1: Production June

JULY

Style 19

Style 20

Hours utilized

Avis

1000

1000

250

Burns

1000

2000

500

June Excess

4000

3000

Total

6000

6000

6000

Required

5000

4000

Excess

1000

2000

Table 2: Production July

AUGUST

Style 19

Style 20

Hours utilized

Avis

1000

6000

750

Burns

1500

0

300

July Excess

1000

2000

Total

3500

8000

1050

Required

2000

5000

Excess

1500

3000

Table 3: Production August

For, the above data, it can be seen that:

In the month of June, the optimum production was at 12000 wastepaper bins. Out of this, 7000 were Style 19 and 5000 Style 20. The total number of hours utilized for both machines was 1950 instead of 2100. This saved the cost of using 150 hours though the demand was met.

Excess production of 7000 (4000 style 19 and 3000 style 20) bins in June is to be stored during the month of July.

Production in the month of July is 2000 and 3000 bins for Style 19 and style 20 respectively. With this figures, a demand of 5000 and 4000 of the respective bin types will be met using part of the excess production from June.

The month of July records an excess of 1000 Style 19 and 2000 Style 20 bins. The production of 2500 and 6000 bins of respective styles causes a total excess of 4500 bins (1500 style 19 and 3000 style 20).

Cost minimization

The costs associated with labor, supervision and overheads can be cut by producing at a slightly lower level than shown in the tables. Tables consider so much the utilization of full capacity of the machines in terms of the number of hours available. Using a lesser number of hours than available does not mean failure to meet deliveries. For example in June, excess production of 7000 bins was achieved when 150 hours was spared. This spared capacity saves labor and related costs. Subsequent month can adopt the same strategy. Please feel free to engage me to discuss more on how lower production levels can be used to save on costs.

Storage costs accrue as more production is done. Mojo Plastics Company should be reluctant to produce at their highest during this summer since most of their space will be occupied by the raw materials. Hiring space in warehouses and other public storage places is an additional cost to the firm.

Sensitivity analysis

Changes in contribution

Contribution to profit per unit may change due to changing costs of production. Though this may not affect the product mix of your firm, you may consider adjusting the price, which s not binding, as may be allowed by your scope to decrease or increase considerably.

Change in sales volume

We strongly advise you to maintain sales at minimum or at the demanded levels to avoid the risky aspects of a high price shadow.

Change in storage costs

Should production rise to levels beyond 2500 style 19 and 1500 style 20 bins in July, the firm should start experiencing diseconomies from hiring more space at a cost of $0.10 per bin every month.

Appendices

Answer report 1

Microsoft Excel 16.0 Answer Report

Worksheet: [assessment.xlsx]assessment

Report Created: 01/10/2017 18:08:26

Result: Solver found a solution. All Constraints and optimality conditions are satisfied.

Solver Engine

Engine: Simplex LP

Solution Time: 0.016 Seconds.

Iterations: 16 Sub-problems: 0

Solver Options

Max Time Unlimited, Iterations Unlimited, Precision 0.000001, Use Automatic Scaling

Max Sub-problems Unlimited, Max Integer Sols Unlimited, Integer Tolerance 1%, Assume Non-Negative

Objective Cell (Min)

Cell

Name

Original Value

Final Value

$H$9

Operating costs (labour+storage)

28200

14900

Variable Cells

Cell

Name

Original Value

Final Value

Integer

$C$29

S19AJun

3000

2333.333333

Contin

$D$29

S20AJun

3000

3500

Contin

$E$29

S19BJun

3000

3166.666667

Contin

$F$29

S20BJun

3000

0

Contin

$G$29

S19AJuly

3000

0

Contin

$H$29

S20AJuly

3000

2500

Contin

$I$29

S19BJuly

3000

2500

Contin

$J$29

S20BJuly

3000

0

Contin

$K$29

S19AAug

3000

1666.666667

Contin

$L$29

S20AAug

3000

5000

Contin

$M$29

S19BAug

3000

333.3333333

Contin

$N$29

S20BAug

3000

0

Contin

$D$33

S19July

3000

2500

Contin

$E$33

S20July

3000

1500

Contin

$F$33

S19Aug

3000

0

Contin

$G$33

S20Aug

3000

0

Contin

Constraints

Cell

Name

Cell Value

Formula

Status

Slack

$H$20

Moulding Machine Hours Avis June

700

$H$20