The typical monthly production mix at Bangor Industries is as follows:
Deluxe models..... 45%
Regular models..... 30%
Economy models..... 25%
Each deluxe model typically requires 5 hours of labor and 10 hours of machine time. Each regular model takes 4 hours of labor and 8 hours of machine time. Finally, the economy model needs, on average, 3.5 hours of labor and 6 hours of machine time.
a. What should the weighted per-unit planning values be for labor? For machine time? What assumptions must be made in order to use these values?
b. Suppose that for the next month the mix is expected to change to 30% deluxe, 30% regular, and 40% economy models. How would this affect the planning values?
c. When the product mix changes from month to month, should Bangor Industries use a top-down or a bottom-up approach to sales and operations planning? Explain.