Question

Canine Kennels Company​ (CKC) manufactures two different types of dog chew toys​ (A and​ B, sold in​ 1,000-count boxes) that are manufactured and assembled on three different workstations​ (W, X, and​ Y) using a​ small-batch process​ (see the figure​ below). Batch setup times are negligible. The flowchart denotes the path each product follows through the manufacturing​ process, and each​ product's price, demand per​ week, and processing times per unit are indicated as well. Purchased parts and raw materials consumed during production are represented by inverted triangles. CKC can make and sell up to the limit of its demand per​ week; no penalties are incurred for not being able to meet all the demand. Each workstation is staffed by a worker who is dedicated to work on that workstation alone and is paid $6 per hour. Total labor costs per week are fixed. Variable overhead costs are​ $3,500/week. The plant operates one​ 8-hour shift per​ day, or 40​hours/week.

The senior management is concerned with the existing capacity​ limitation, so they want to accept the mix of orders that maximizes the​ company's profit.​ Traditionally, CKC has utilized a method whereby decisions are made to produce as much of the product with the highest contribution margin as possible​ (up to the limit of its​ demand), followed by the next highest contribution​ product, and so on until no more capacity is available. Because capacity is​ limited, choosing the proper product mix is crucial. Troy​ Hendrix, the newly hired production​ supervisor, is an avid follower of the theory of constraints philosophy and the bottleneck method for scheduling. He believes that profitability can indeed be improved if bottleneck resources are exploited to determine the product mix.

a. What is the profit if the traditional contribution margin method is used for determining​ CKC's product​ mix?

The profit with the traditional approach is

​$41104110.

​(Enter your response rounded to the nearest whole​ number.)

b. What is the profit if the bottleneck method is used for determining​ CKC's product​ mix?

The profit with the new bottleneck approach is

​$nothing.

​(Enter your response rounded to the nearest whole​ number.)

Answer 1