Accounting Information Systems
Autor: Rachel • March 24, 2018 • 1,166 Words (5 Pages) • 856 Views
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Q2)a) Capacity of which departments would constrain the production? (Lai)b) What would be the best product mix if engine assembly capacity were raised by one unit, from 4,000 to 4,001 machine hours? What is the extra unit of engine assembly capacity worth?
In regards to constraint of productions, engine assembly hours has a huge influence over the optimized output. For example, when the total machine hours available is increased by 1, the total machine hours costs increase by 650, while total labour hours decreases by 100 after solver is applied. Total profit also increases by 250.
Before Solver
Machine Hour
EX 1001
Machine Hour
EX1002
Total
Total machine hours available for the quarter
Engine Assembly
1000
3000
4000
4000
Metal Stamping
2000
3000
5000
6000
Model EX1001
Assembly
2000
0
2000
5000
Model EX1002
Assembly
0
4500
4500
4500
5000
10500
15500
19500
After Solver
Machine Hour
EX 1001
Machine Hour
EX1002
Total
Total machine hours available for the quarter
Engine Assembly
1999
2002
4001
4001
Metal Stamping
3998
2002
6000
6000
Model EX1001
Assembly
3998
0
3998
5000
Model EX1002
Assembly
0
3003
3003
4500
9995
7007
17002
19501
Table 2.1 Comparison table for when machine hours increases by 1
When the total machine hours are increased by 1, Forley will be able to produce 1999 units of EX1001 and 1001 units of EX1002. At this production mix, there is a $250 increase in revenue.
Solver Output Version 1
Total Variable Cost
(£)
Total Fixed Cost
(£)
Total Revenue (£)
Profit
(£)
Model EX1001
60,300,000
25,000,000
80,000,000
4,800,000
Model EX1002
27,900,000
38,000,000
Solver Output Version 1
(Modified Machine Hours by 1)
Total Variable Cost
(£)
Total Fixed Cost
(£)
Total Revenue (£)
Profit
(£)
Model EX1001
60,269,850
25,000,000
79,960,000
4,800,250
Model EX1002
27,927,900
38,038,000
Table 2.2 Profit comparison for when machine hours increases by 1
Q3) 3. The Production Manager suggests purchasing Model EX1001 or Model EX1002 engines from an outside supplier in order to relieve the capacity problem in the engine assembly department. If Forley’s HighTeck decides to pursue this alternative, it will be effectively ‘renting’ capacity: furnishing the necessary materials and engine components, and reimbursing the outside supplier for labour and overhead. Should the company adopt this alternative? If so, what is the maximum rent it should be willing to pay for a machine hour of engine assembly capacity? What is the maximum number of machine hours it should rent?
Based on the Production Manager’s suggestion, all costs besides the machining
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