Q1) Trikes Unlimited produces small motorcycles. Monthly demand ranges from 80 to 100 motorcycles. Average demand is 92 motorcycles. Plant operates 300 hours a month. Each cycle takes approximately 1.5 hours.
If company adds new line of scooters, initial demand will be 20 per month. Each scooter will take 1 hour to make. To offset approaching production capacity, expanding assembly line is possible. This will reduce manufacturing time for all products by 20%. Though, this will increase costs of cycles from $400 to $500 and scooters from $200 to $240. Change will also cause increases in prices from $700 to $750 for cycles and from $450 to $500 for scooters.
Question:
a. Determine the average waiting time for cycles if they are only item manufactured?
b. Compute average waiting times if both cycles and scooters are produced and assembly line is not enlarged?
c. Determine average waiting times if both cycles and scooters are made and assembly line is enlarged?
d. Compute expected monthly margin without scooters if the company sells all 92 cycles it manufactures?
e. Determine the expected monthly contribution margins if scooters are made with the present assembly line and with new assembly line? Suppose average sales and that sales equal production.
f. What action do you suggest?