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Hi Dear Tutor, If two divisions have surplus capacity but one division’s surplus is lower than another divison’s surplus, can we consider the lowest surplus is the bottleneck division?
We normally talk about the bottleneck in relation to processes rather than divisions.
However the bottleneck process is the process that is slowing everything down – it is the process that takes the longest per unit, which is the same as the process that has the lowest capacity.
There will only be surplus capacity in all the processes if the demand is less than the capacity of all of the processes and in that case there is no relevance to their being a bottleneck.
I took it from Bpp study text
Corrie company has three products. X,Y, and Z. The company of Corrie’s plant is restricted by process Alpha. Process Alpha is expected to be operational for eight hours per day and can produce 1,200 units of X per hour, 1,500 units of Y per hour, and 600 units of Z per hour.
Selling price and material costs per unit for each product are as follows:Product———–Selling price p.u——-Material cost p.u——–Throughtput per unit
X———————–150———————-(80)================70
Y———————–130———————–(40)===============90
Z———————–300———————–(100)===============200Operating costs are $720000 per day
A) calculate profit per day if daily output is 6000 units of X,4500 units of Y and 1200 units of Z.
B )Calculate of TA
Dear Tutor, How can I find here bottleneck?such a confusing question.
Need explanation.
The bottleneck is process Alpha because the question says that the company is restricted by process Alpha.
Dear Tutor, Why I can not multiply eight hours with the units if the process can product 1200 units per hour?when I first tried to find cost per factory hour I did not take eight hours instead i multipled as above I said but still can not understand. I have only small weaknesses in throughput accounting which still can not clarify it by my own. Your cut and treatment video example almost removed some haziness in my mind relating to this area but still having some hardships.
If units are 1200 of x how 6000 outputs are achived?I really can not understand it
daily ouput
x—6000
y-4500
z–1200Given that the operating costs are $720,000 a day and given that they operate for 8 hours a day, then the cost per hour is 720,000/8. For this it is irrelevant how many units they are producing.
As far as the production is concerned, although they are capable of producing 1,200 x 8 = 9,600 units of X per day, it doesn’t mean that they will produce that many. They will only produce what they are going to be able to sell. The daily output is 6,000 units of X so for whatever reason that is the number of units they will actually produce. The fact that they are capable of producing 1,200 units an hour means that the time taken to produce is 1/1,200 hours per unit.
From my point of understanding:
———————————————————x———————–y——————————z
Machine hours per unit -1/1200=0.0008333333,1/1500=0.0006666667,1/600=0.0016666667Selling price—————————–150—————————130—————————300
Material cost—————————-(80)—————————(40)—————————(100)
Throughput per unit============70————————–90——————————200BTL per hour,70/0.0008333333=84000,90/0.0006666667=135000,200/0.0016666667=120000
Ranking================3===================1======================2
Demand—————————–6000————————–4500—————————1200
Bottleneck hr.p.u,———-0.0008333333—————–0.0006666667———0.0016666667
Total hours required========5hrs—————————–3hr————————–2hr====10
Total hours available====================================================8
Shortfall=============================================================(2)Determine production plan
Product———–units———————————BTL.hr.p.u—-Total hours—-Throughput p.h
Y——————4500————————–0.0016666667—————3*135000=405000
Z—————–1200—————————0.0006666667—————2*120000=240000
X——————3600(3hrs/0,0008333333)——0.0008333333——–3(BF)*84000=252000Total throughput=897000-720000=total operating cost=total profit 77000,
why i can get the same profit(345000) calculated in the example?I hope you now get where and which part I usually find confusion and difficulty.That is why i just described my approach.
In the example,I took machine hour per unit just 1 hour but it should be 1/1200
total hours available=8
Machine bottleneck hour per unit=0.0008333333–0.0006666667—-0.0016666667X==8/0.0008333333=9600
Y=8/0.0006666667=12000
Z=8/0.0016666667=4800
here i find Z is the lowest but above description I found the lowest X.I really get confused.
For part A of the question you are specifically told how many units of each they are producing. You are not asked for a production plan because you are told what they are producing! They produce 6000 units of X,4500 units of Y and 1200 units of Z.
I think i understood it now.
Process Alpha is expected to be operational for eight hours per day and can produce 1,200 units of X per hour, 1,500 units of Y per hour, and 600 units of Z per hour.
They just gave me bottleneck hour per unit in different way to find it by my own
1/1200 for x and so onThen if total hours are 8 hrs and if i take bottleneck hour per unit and divide it into 8 hours then it is overall 9600 units.they can produce it but they have to produce how many sales demand needed.
Usually in any example if we divide bottleneck hour per unit into total limited hours we get production units so the lowest units will be the bottleneck.In other words we can just add each department bottleneck hour per unit and the highest figure will be the bottleneck like in the following way
PROCEAAING TIMEA IN HOURS
—————————-Assembly———Finishing
Product A—————–0.5——————0.75
Product B——————-0.5——————-1HOURS AVAILABLE–12000———12000
(LIMITED)Assembly
12000/0.5=24000
12000/0.5=24000
Overall=48000Finishing-this department is bottleneck
12000/0.75=16000
12000/1=12000
Overall=28000alternative way
Assembly=0.5+0.5=1(spend less time) but produced mor3Finishing-bottleneck(spent more hours) but produced less
0.75+1=1.75When goods are made, the factory effectively operates at the rate of the slowest process, and there will be unavoidable idle capacity in other operations. what does idle capacity in other operations mean here?It does emphasise there will be extra unsued resources after meeting the requirements in one operation compared to prior operation?
Suppose there are two processes, one after the other.
The first process can deal with up to 1,000 units a day. The second process can deal with up to 1,500 a day.
Given the the units have to pass through both processes, the most that can be made is 1,000 a day because that it all that can be done in the first process. If only 1,000 are coming out of the first process and then going into the second process then only 1,000 are being produced even though the second process could deal with more. So the second process has unused capacity – they could work on 1,500 but they are only actually working on 1,000 because that is all they are receiving from the first process.
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