The Seagate Disk-drive Company is planning annual assembly capacity for each of its three potential new products, code-named P, Q, and R. Installed assembly capacity for each product is dedicated. That is, assembly capacity for a product can be used only to make that product and no other product. The total budget available for installing assembly capacity is 200,000$. For each product, the following table provides data on the unit profit margin (excluding capacity costs), the unit cost of assembly capacity, and the annual demand. [You may ignore cost data that is not specified and assume that each of the three products are profitable.]

1. (15 points) Bottleneck Ratio, Production Plan, Profit: In the table below, calculate the bottleneck ratios. Use the bottleneck ratio method to prioritize products and to determine how many units of assembly capacity should be installed for each of the products to make good use of the available 200,000 $ budget. Calculate the resulting total annual profit. Product P Q R Unit Profit Margin (Profit $/unit) 24 18 42 Maximum Annual Demand (in 1000s of units) 20,000 = 20K 70 K 45 K Unit Assembly Capacity Cost (Budget $/unit) 4 2 6 Page 3 of 5 Bottleneck Ratio Product Priority (1 = highest) Assembly Capacity Installed in # of units. Total Annual Profit =

2. (* Max 10 points) Modified Data and Broader Conceptual Thinking: Answer ANY of the following questions you choose to reach your 75+ points: (i) (*5 points) Mention at least two distinct conceptual aspects (practical aspects) of planning for the amount of assembly capacity to install that are not being considered when we solve this problem using the PQ model. (ii) (*5 points) Suppose, due to unexpected competitive factors, the profit from product Q is expected to decrease from 18 $/unit to 16 $/unit and the Maximum Annual Demand for Q decreases to 60K or 60,000 units. Assuming you still use the bottleneck ratio approach, how will your product prioritization and capacity installation plan change

Answer rating: 100% (QA)

Lets start by calculating the bottleneck ratios for the products using the bottleneck ratio method The bottleneck ratio is calculated as the unit profit margin divided by the unit assembly capacity co... View the full answer