A company that manufactures paving material for driveways and parking lots expects the following demand for its product for the next four weeks: Week number 1 2 3 4
Material(tons) 40 80 60 70
Production standard
(hours per ton) 4 3
Material production
capacity(hours) 300 200
A. Determine the capacity utilization for labor and machine for each of the four weeks.
B. In which weeks do you foresee a problem? What options would you suggest to resolve any problems? What costs are relevant in making a decision on choosing an option?

A. Capacity Utilization for Labor and Machine

                    Labor          Capacity  %              Machine     Capacity  %

Week 1        160 (40*4)    53.3% (160/300)       120 (40*3)   60% (120/200)

Week 2       320 (80*4)  106.7% (320/300)     240 (80*3)  120% (240/200)

Week 3       240 (60*4)    80% (240/300)        180 (60*3)   90% (180/200)

Week 4       280 (70*4)    93.3% (280/300)     210 (70*3)  105% (210/200)

B. There is a problem in weeks 2 and week 4.  In week 2, both the labor and machine capacities were over-utilized, while in week 4 only the machine capacity was over-utilized.  In other weeks, there were notable under-utilization of labor and machine capacities.

B2. Production materials for the weeks should have been made even (60 tons per month) to smoothen the demand on weeks 2 and 4.

B3. The relevant costs involved in making this decision are direct labor costs.

Explanation:

a) Data and Calculations:

Week number          1       2      3      4

Material(tons)          40    80    60   70

The company’s labor and machine standards and available capacities are as follows:

                                                                Labor   Machine

Production standard  (hours per ton)         4            3

Material production  capacity(hours)     300       200

A. Capacity Utilization for Labor and Machine

                    Labor          Capacity  %              Machine     Capacity  %

Week 1        160 (40*4)    53.3% (160/300)       120 (40*3)   60% (120/200)

Week 2       320 (80*4)  106.7% (320/300)     240 (80*3)  120% (240/200)

Week 3       240 (60*4)    80% (240/300)        180 (60*3)   90% (180/200)

Week 4       280 (70*4)    93.3% (280/300)     210 (70*3)  105% (210/200)

Total labor hours = material * production standard hour per ton.

Total machine hours = material * production standard hour per ton.

explanation: doctrine of respondeat superior is a legal doctrine that is commonly used in tort. this principle makes an employer or principal legally responsible for the wrongful acts done by an employee or agent, if such acts occur within the scope of the employment or agency.

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