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Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
Da   merton truck company case study
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Da merton truck company case study

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  • 1. Case Study – Merton Truck Company Case Study Merton Truck Company Submission Date 16-Oct-2009 Class EPGP– 09-10 Subject Decision Analysis Instructor Prof. N. Ravichandran Prof. Vinay Submitted by Rajendra Inani Table of contents Question 1 (a) Optimized Product Mix for Maximization of Profit................................................2 Question 1 (b) Increase in Engine Assembly Capacity by 1 Unit...................................................3 Question 1 (c) Additional Engine Assembly Capacity – 100 Units................................................6 Question 1 (d) Maximum Additional Engine Assembly Capacity..................................................8 ..........................................................................................................................................................8 Question 2 Outsourcing - Additional Engine Assembly Capacity..................................................9 ..........................................................................................................................................................9 Question 3(a) – Introduction of new model 103............................................................................11 Question 3(b) –New model 103 – Change in contribution............................................................13 Question 4 - Additional Capacity of 2000 Engine Ass. Hours......................................................15 ........................................................................................................................................................15 Question 5 Model 101 production – 3 times Model 102...............................................................18 ........................................................................................................................................................18 Page 1 of 19
  • 2. Case Study – Merton Truck Company Question 1 (a) Optimized Product Mix for Maximization of Profit Page 2 of 19
  • 3. Case Study – Merton Truck Company Question 1 (b) Increase in Engine Assembly Capacity Model 101 Model 102 Total Contribution Production Units 1999 1001 2402000 Increase by $ 2000 Machine Hours requirement and Availability - Constraints Department Model 101 Hours Model 102 Hours Used capacity Hours Maxi Hours per month % Utilz Page 3 of 19
  • 4. Case Study – Merton Truck Company Page 4 of 19
  • 5. Case Study – Merton Truck Company Page 5 of 19
  • 6. Case Study – Merton Truck Company Question 1 (c) Additional Engine Assembly Capacity – Model 101 Model 102 Total Contribution Production Units 1900 1100 2600000 Additional Contribution $ 200000 Machine Hours requirement and Availability - Constraints Department Model 101 Hours Model 102 Hours Used capacity Hours Page 6 of 19
  • 7. Case Study – Merton Truck Company Page 7 of 19
  • 8. Case Study – Merton Truck Company Question 1 (d) Maximum Additional Engine Assembly Model 101 Model 102 Total Contribution Production Units 1500 1500 3400000 Additional Contribution $ 1000000 Machine Hours requirement and Availability - Constraints Department Model 101 Hours Model 102 Page 8 of 19
  • 9. Case Study – Merton Truck Company Question 2 Outsourcing - Additional Engine Assembly Model 101 Model 102 Total Contribution Production Units 1500 1500 3187500 Additional Contribution $ 787500 *Rate to be paid to vendor $ 3725 per hours Machine Hours requirement and Availability - Constraints Department Model 101 Hours Model 102 Page 9 of 19
  • 10. Case Study – Merton Truck Company Page 10 of 19
  • 11. Case Study – Merton Truck Company Question 3(a) – Introduction of new model 103 Model 101 Model 102 Model 103 Total Contribution Production Units 2000 1000 0 2400000 Not Profitable Machine Hours requirement and Availability - Constraints Department Model 101 Model 102 Model 103 Used Maxi % Utilz Hours Hours Hours capacity Hours per Hours month Engine Assembly 1 2 0.8 4000 4000 100 Metal Stamping 2 2 1.5 6000 6000 100 Model 101 assembly 2 1 4000 5000 80 Model 102 assembly 3 3000 4500 66.66 Calculation of Cost and Contribution Standard Product Model Model 102 / Model 103 / Total for Costs 101 / Unit Unit Unit Production Direct Material 24000 20000 68000000 Direct Labor 4000 4500 12500000 Overhead -Fixed 8600000 Overhead - Variable 8000 8500 5230 24500000 Total cost / Unit 36000 33000 5230 113600000 Selling price / unit 39000 38000 7230 116000000 Per Unit Contribution before F/OH 3000 5000 2000 Overhead Calculations (US $) Department F OH per V OH /Unit V OH /Unit V OH /Unit Page 11 of 19
  • 12. Case Study – Merton Truck Company month model 101 model 102 model 103 1700000 Engine Assembly 2100 4000 1680 2700000 Metal Stamping 2400 2000 1800 Model 101/103 2700000 assembly 3500 1750 1500000 Model 102 assembly 2500 8600000 Total Overheads 8000 8500 5230 Page 12 of 19
  • 13. Case Study – Merton Truck Company Question 3(b) –New model 103 – Change in contribution Model 101 Model 102 Model 103 Total Contribution Production Units 0 857 2857 2402857 Beneficial Contribution $2351 Machine Hours requirement and Availability - Constraints Department Model 101 Model 102 Model 103 Used Maxi Hours % Utilz Hours Hours Hours capacity per month Hours 1 2 0.8 4000 4000 100 Engine Assembly 2 2 1.5 6000 6000 100 Metal Stamping 2 1 2857.14 5000.00 57.14 Model 101 assembly 3 2571.43 4500.00 57.14 Model 102 assembly Calculation of Cost and Contribution Standard Product Model Model 102 / Model 103 / Total for Costs 101 / Unit Unit Unit Production 24000 20000 17142857.14 Direct Material 4000 4500 3857142.857 Direct Labor 8600000 Overhead -Fixed 8000 8500 5230 22228571.43 Overhead - Variable 36000 33000 5230 51828571.43 Total cost / Unit 39000 38000 7581 54231428.57 Selling price / unit Per Unit Contribution 3000 5000 2351 before F/OH Page 13 of 19
  • 14. Case Study – Merton Truck Company Overhead Calculations (US $) Department F OH per V OH /Unit V OH /Unit V OH /Unit month model 101 model 102 model 103 1700000 Engine Assembly 2100 4000 1680 2700000 Metal Stamping 2400 2000 1800 Model 101/103 2700000 assembly 3500 1750 1500000 Model 102 assembly 2500 8600000 Total Overheads 8000 8500 5230 Page 14 of 19
  • 15. Case Study – Merton Truck Company Question 4 - Additional Capacity of 2000 Engine Ass. Model 101 Model 102 Total Contribution Production Units 1500 1500 2350000 Additional Contribution - $ 50000 Machine Hours requirement and Availability - Constraints Department Model 101 Hours Model 102 Hours Used capacity Page 15 of 19
  • 16. Case Study – Merton Truck Company Page 16 of 19
  • 17. Case Study – Merton Truck Company Page 17 of 19
  • 18. Case Study – Merton Truck Company Question 5 Model 101 production – 3 times Model 102 Model 101 Model 102 Total Contribution Production Units 2250 750 1900000 Additional Contribution - $ 500000 Machine Hours requirement and Availability Department Model 101 Hours Model 102 Hours Used capacity Hours Maxi Hours per month % Utilz Page 18 of 19
  • 19. Case Study – Merton Truck Company **************End of assignment ***************** Page 19 of 19

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