2. Problem #2 (Process Improvement)

Atlas Inc. is a toy bicycle manufacturing company producing a five-inch small version of the bike. The assembly line at Atlas Inc. consists of 5 work stations, each performing a single step. Stations and processing times are summarized here:

• Step 1 (30 sec.): The plastic tube for the frame is cut to size.
• Step 2 (20 sec.): The tube is put together.
• Step 3 (35 sec.): The frame is glued together.
• Step 4 (25 sec.): Paint is sprayed onto the frame.
• Step 5 (30 sec.): Wheels and all other parts are assembled to the frame.

Under the current process layout, workers are allocated to the stations as shown here:

• Worker 1: Steps 1 and 2
• Worker 2: Steps 3 and 4
• Worker 3: Step 5

Assume the workers are paid $15 per hour. Each bicycle is sold for $6 and includes parts that are sourced for $1. The company has fixed costs of $200 per hour. There exists substantially more demand for the bicycle than Atlas can supply.

Questions;

a. Draw a process flow diagram of this process. (10pts/100)

b.	What would be the profits per hour? (20pts/100)

c. Assume demand rate is 65 units per hour. Which option is the best in terms of the profits per hour? (20pts/100)

Option #1: 10% lower material costs, Option #2: 10% lower fixed costs, Option #3: 10% faster at bottleneck