Complete chapter 7, Case 2 from the Jiambalvo textbookComplete individually as anessay or narrative, not as answers to questions or as a problem. Calculations may be necessary to illustrate the issue or to support conclusionsInclude an executive summary, overview of situation, issues addressed, suggested resolution, and conclusion. The overview need not contain a complete restatement of the case, just enough background for a reader not familiar with the case to follow the narrativeComplete in good grammatical form with appropriate business tone and logical narrative flow. Grading will include grammar, sentence structure, paragraph form and structure of the narrativePaper should be one or two single-spaced pages using 11 pt. font and excluding any titles or supplementsIfanysourcesotherthanthetextbookareused,theyshouldbecitedappropriately7-2FiveStarToolsThiscaserelatestotheappendixontheTheoryofConstraintsFiveStarToolsisasmallfamily-ownedfirmthatmanufacturesdiamond-coatedcuttingtools(chiselsandsaws)usedbyjewelers.Productioninvolvesthreemajorprocesses.First,steelblanks(toolswithoutthediamondcoating)arecuttosize.Second,theblanksaresenttoachemicalbaththatpreparesthetoolsforthecoatingprocess.Inthethirdmajorprocess,theblanksarecoatedwithdiamondchipsinaproprietaryprocessthatsimultaneouslycoatsandsharpensthebladeofeachtool.Followingthecoatingprocess,eachtool isinspectedanddefectsarerepairedorscrapped. Inthepasttwoyears,thecompanyhasexperiencedsignificantgrowthandgrowingpains.Thecompanyisatcapacityinthecoatingandsharpeningprocess,whichrequireshighlyskilledworkersandexpensiveequipment.Becauseofthebottleneckcreatedbythisoperation,thecompanyhasmisseddeadlinesonordersfromseveralimportantcustomers.MaxfieldTurner,thesonofFrederickTurner,founder ofFiveStarTools,isthepresidentofthecompany.OverlunchheandBettySpence,vicepresidentofmarketing,discussedthesituation.Wevegottodosomething,Bettybegan.Ifwedontthinkwecanmeetacustomersorderdeadline,weshouldturndownthebusiness.Wecantsimplykeepcustomerswaitingforproductorwelldevelopareputationasanunreliablesupplier.YouknowaswellasIdothatthiswouldbedevastatingtoourbusiness.Ithinktheremaybeanotherapproach,Betty,repliedMax.Someofourproductsareexceptionally profitable.Maybeweshouldconcentrateonthemanddropsomeofthelessprofitableones. Thatwouldfreeup ourproductionresources.Ormaybewecanfigureoutawaytorunmoreproductthroughthecoatingprocess. Ifwecouldjustloosenthatconstraint,Iknowwecouldimproveourresponsetimeandprofitability.Illtellyou whatIlldo.Illgettheaccountingdepartmenttoprepareananalysisofproductprofitability. Thatshouldhelp usfigureoutwhichproductstoconcentrateon.AndIllgettheproductionpeoplethinkingabouthowtofree upsometimeincoating.Wellmeetearlynextmonthandtrytogetahandleonhowtodealwithourproduction constraints.Required:Whatstepscanbetakentoloosentheconstraintincoatingandsharpening?ConsiderModelc210andModelD400chisels.WhichProductshouldbeemphasizediftheconstraintincoatingandsharpeningcannotbeloosened?Focusingonlyonthemodelc210chiselandthemodeld400chisel,whatwouldbethebenefittothefirmofgainingonemorehourofproductiontimeincoatingandsharpening?Incoatingandsharpening,theoperatorbeginsbyinspectingitemsthathavearrivedfromthechemicalbath.Ifroughedgesorblemishesaredetected,theoperatorsmoothsand/orbuffstheitemsbeforeactualcoatingorsharpening,(NOTEthatthisprocessisinadditiontotheinspectionthattakesplaceataseparatestationfollowingcoatingandsharpening,)Inordertosavevaluabletimeincoatingandsharpening,mgmt.isconsideringformingaseparateinspectionstationbeforethecoatingandsharpeningprocess.Theinspectionstationcanutilizeexistingsmoothingandbuffingequipment,anditcanbestaffedonanasneeded-basisbyanemployeewhonormallyworksinthechemicalbatharea,whichhasexcesscapacity(sotheemployeewillnotbemissedforbriefperiods.Mgmtestimatesthatthisactionwillfreeup240hoursincoatingandsharpening(anaverage5minutesperhourx8hoursperdayx360operatingdaysperyear/60).Mgmthascalculatedthattheaveragecontributionmarginperunitforitsproductsis$300.theaveragecontributionmarginperhouris$850.00.

Basedonthisinformation,estimatetheincrementalprofitperyearassociatedwithaddingtheinspectionstation?

Modelc210Chisel

SellingPrice:500.00

LessVariableCOsts:DirectLabor:85DirectMaterial:150VariableOverhead:15250

ContributionMargin:250

LessAllocatedFixedCosts:185

ProfitPerUnit:65

Timeincoatingandsharpeningtoproduce1:.2hours

ModelD400Chisel

SP:850.00

LVC:DL:180DM:180VO:60420

ContributionMargin:430

LAFC:230

PROFITPERUNIT:200

TIME IN COATING AND SHARPENING: .8 hours.