Production Strategy assessment – Part 1

NOTE: YOU WILL BE COMPLETING THIS IN EXCEL

I have split this into 2 parts. I am hoping this will be easier if you think about the pieces broken down.

New Brand Equipment (NBE) is a riding lawn mower manufacturer. It has two designs that it has designed for the consumer market. Up to now, these types of high-volume mowers were only used in the commercial market at a hefty rate, but they are trying to get into the consumer market and trying to make the costs affordable.

After significant dealer interest at trade shows, NBE decided to put these mowers into production. In fact, they had more orders than they can manufacture in the current period. They 2 mowers, LM100 and LM200 require different amounts of resources to produce.

The LM100 has a frame unit, a motor unit and an deck unit. Each frame produced uses 4 hours of machining/welding and 2 hours of painting/finishing. Each motor unit requires 2 hours of machining/welding and 1 hour of painting/finishing. Each deck unit requires 2 hours of machining/welding and 2 hours of painting/finishing. In addition, 2 hours are spent assembling, testing and packaging each LM100. The raw material costs are $450 for each frame, $300 for each motor and $250 for each deck unit. Packaging costs are estimated at $50 per unit.

The LM200 has a frame unit, a motor unit, a deck unit and bagging unit. Each frame produced uses 5 hours of machining/welding and 4 hours of painting/finishing. Each motor unit requires 3 hours of machining/welding and 2 hours of painting/finishing. Each deck unit requires 2 hours of machining/welding and 2 hours of painting/finishing. Each bagging unit requires 2 hours of machining/welding and 2 hours of painting/finishing. In addition, 2 hours are spent assembling, testing and packaging each LM200. The raw material costs are $650 for each frame, $400 for each motor, $250 for each deck unit and $200 for each bagging unit. Packaging costs are estimated at $75 per unit.

In the next cycle of production, management is estimating 600 hours available for machining/welding, 450 hours available for painting/finishing, and 140 hours available for assembling, testing and packaging. Current labor costs are $20 per hour for machining/welding, $15 per hour for painting/finishing and $12 per hour for assembling, testing and packaging.

Management arrived at a retail price of $2400 for LM100 and $3500 for the LM200. Authorized NBE dealers can purchase machines for 70% of the suggested retail price.

NBE’s management team believes that the new style and features of the LM series can position them as one of the leaders in the high-end consumer market. Consequently, they believe that the number of units of the LM200 must be at least 25% of the total production.

Your job is to analyze the production problem for NBE and prepare a “report” presenting the findings and recommendations. Include, but not necessarily limit, the following items:

Can you identify the constraints as the part 1? What is the objective function? How would you come up with the profit given the retail price and the costs?