A bicycle component manufacturer produces hubs for bike wheels. Two processes are possible for manufacturing, and the parameters of each process are as follows:
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Process 1
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Process 2
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Production rate
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35 parts/hour
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15 parts/hour
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Daily production time
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4 hours/day
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7 hours/day
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Percent of parts
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20%
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9%
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rejected based on
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visual inspection
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Assume that the daily demand for hubs allows all defect-free hubs to be sold. Additionally, tested or rejected hubs cannot be sold.
Find the process that maximizes profit per day if each part is made from $4 worth of material and can be sold for $30. Both processes are fully automated, and variable overhead cost is charged at the rate of $40 per hour. (2.4)