Case Study – Merton Truck Company

Case Study                                                 Merton Truck Company

Submis...
Case Study – Merton Truck Company



    Question 1 (a) Optimized Product Mix for
             Maximization of Profit




...
Case Study – Merton Truck Company


Question 1 (b) Increase in Engine Assembly Capacity


   Model 101
   Model 102
   Tot...
Case Study – Merton Truck Company




                                Page 4 of 19
Case Study – Merton Truck Company




                                Page 5 of 19
Case Study – Merton Truck Company


Question 1 (c) Additional Engine Assembly Capacity –


   Model 101
   Model 102
   To...
Case Study – Merton Truck Company




                                Page 7 of 19
Case Study – Merton Truck Company


Question 1 (d) Maximum Additional Engine Assembly




   Model 101
   Model 102
   Tot...
Case Study – Merton Truck Company


Question 2 Outsourcing - Additional Engine Assembly




   Model 101
   Model 102
   T...
Case Study – Merton Truck Company




                                Page 10 of 19
Case Study – Merton Truck Company




Question 3(a) – Introduction of new model 103
                        Model 101     ...
Case Study – Merton Truck Company
                      month    model 101    model 102   model 103
                     1...
Case Study – Merton Truck Company




Question 3(b) –New model 103 – Change in
contribution
                        Model ...
Case Study – Merton Truck Company
                               Overhead Calculations (US $)

Department            F OH ...
Case Study – Merton Truck Company


Question 4 - Additional Capacity of 2000 Engine Ass.


   Model 101
   Model 102
   To...
Case Study – Merton Truck Company




                                Page 16 of 19
Case Study – Merton Truck Company




                                Page 17 of 19
Case Study – Merton Truck Company


Question 5 Model 101 production – 3 times Model 102


   Model 101
   Model 102
   Tot...
Case Study – Merton Truck Company

                   **************End of assignment *****************




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Da merton truck company case study

  1. 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. 2. Case Study – Merton Truck Company Question 1 (a) Optimized Product Mix for Maximization of Profit Page 2 of 19
  3. 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. 4. Case Study – Merton Truck Company Page 4 of 19
  5. 5. Case Study – Merton Truck Company Page 5 of 19
  6. 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. 7. Case Study – Merton Truck Company Page 7 of 19
  8. 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. 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. 10. Case Study – Merton Truck Company Page 10 of 19
  11. 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. 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. 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. 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. 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. 16. Case Study – Merton Truck Company Page 16 of 19
  17. 17. Case Study – Merton Truck Company Page 17 of 19
  18. 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. 19. Case Study – Merton Truck Company **************End of assignment ***************** Page 19 of 19

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