ABC DEMM LTD CASEQ.1.Current Capacity of the plant

Morning ShiftsLength of Shift (minutes) 450Setup time for gear machining (minutes) 120Total time available for H1 (minutes) 330Time required for machining of a gear (H1) 5Number of gears machined per shift (H1) 66Setup time for gear machining (minutes) 60Total time available for S1 (minutes) 390Time required for machining of a gear (S1) 3Number of gears machined per shift (S1) 130Setup time for shaft machining (minutes) 120Total time available H2 (minutes) 330Time required for machining of a shaft (H2) 8Number of shaft machined per shift (H2) 41Setup time for gear machining (minutes) 60Total time available for S2 (minutes) 390Time required for machining of a shaft (S2) 5Number of shafts machined per shift (S2) 78Time available for heat treatment 450Number of gears heat treated per shift (Max.) 250Time available for heat treatment 450Number of shafts heat treated per shift (Max.) 100Setup time for gear finish grinding (minutes) 30Total time available for finish grinding of a gear FG1+FG2 (minutes) 840Time required for finish grinding of a gear (FG1+FG2) 2Number of gears finished per shift (FG1+FG2) 420Setup time for shaft finish grinding (minutes) 30Total time available for finish grinding of a shaft FG1+FG2 (minutes) 840Time required for finish grinding of a shaft (FG1+FG2) 6Number of shafts finished per shift (FG1+FG2) 140

Therefore, capacity is constrained by number of gears and shaft which can be machined (Hobber) per shift as it is the lowest capacity machine on the floor layout (H1 - 234 gears, H2 - 145 shafts).

Number of gears finished per day 234Number of shafts finished per day 145Number of gearboxes finished per day 58Number of gearboxes finished per month 1450Number of gearboxes finished per year 17400Taking 85% efficiency into account, revised capacity 14790

Therefore, current capacity of plant is 14790 gearboxes per year.

Assumptions: The machines HI, S1, H2, S2 and FG1 and FG2 have to be set up once every day (for all three shifts). Hence, available time for working is reduced by setup time in every shift.

The capacity can be increased in the following manner1. The number of required sets of shafts is less compared to the gears needed for a gear box, so we can choose to convert H2 and S2 to gear hobbing and shaving machines after every few shifts

ABC DEMM LTD CASE

Evening Shift Night shift450 390

0 0450 390

5 590 78 234

0 0450 390

3 3150 130 410

0 0450 390

8 856 48 145

0 0450 390

5 590 78 246

450 390250 250 750450 390100 100 300

0 0900 780

2 2450 390 1260

0 0900 780

6 6150 130 420

Therefore, capacity is constrained by number of gears and shaft which can be machined (Hobber) per shift as it is the lowest capacity machine on the floor layout (H1 - 234 gears, H2 - 145 shafts).

Assumptions: The machines HI, S1, H2, S2 and FG1 and FG2 have to be set up once every day (for all three shifts). Hence, available time for working is reduced by setup time in every shift.

1. The number of required sets of shafts is less compared to the gears needed for a gear box, so we can choose to convert H2 and S2 to gear hobbing and shaving machines after every few shifts

Therefore, capacity is constrained by number of gears and shaft which can be machined (Hobber) per shift as it is the lowest capacity machine on the floor layout (H1 - 234 gears, H2 - 145 shafts).

Assumptions: The machines HI, S1, H2, S2 and FG1 and FG2 have to be set up once every day (for all three shifts). Hence, available time for working is reduced by setup time in every shift.

1. The number of required sets of shafts is less compared to the gears needed for a gear box, so we can choose to convert H2 and S2 to gear hobbing and shaving machines after every few shifts

Q2.Gear Box Manufacturing Cost

Sr.No Item Cost S.No Factor1 Gear Blanks 2400 1 Sales Realization2 Cost of Gear Shaft blanks 2800 2.a Raw Material Cost3 Grear Housing 6000 b Bought out items4 Gear Box Assembly Kit 800 c Rejections5 Other Tools and consumables 340 d Packing material costs6 Packaging material 160 3 Manpower

Total Cost Price of Gear Box 12500 a Directb Indirect

Selling Price of the Gear Box 20000 4 Other cost tools and consumables5 Plant O H and Power etc.

Sr.No Worker Cost 6 Repairs and Maintenance1 Regular 792000 7 Depreciation2 Temporary 18000 8 Interest3 Supervisor 90000 9 Administrative and selling costs4 Executive 80000 10 Welfare costs

Total Monthly Direct Labor Cost 980000 11 [1-(2 to 10)] PBT

Capacity (current) 14790 Profitability (PBT/Sales)Sales 2013-14 11700 Increase in profitabilityIncreased capacity 16320Expected Sales (2014-15) 13455

Current234000000 269100000

60840000 6996600079560000 91494000

1216800 13993201872000 2152800

11760000 117600000 0

3978000 457470012240000 10836000

4680000 53820007480000 74800007200000 72000004680000 53820001000000 1000000

37493200 50473180

16.02% 18.76%17.06%

After Changes(for 25% increase in profitability

Q3.We propose to convert H2 and S2 to gear machining and use 10% of time on H2 and S2 for gear machining. Rest 90% time will be used for shaft machining.

0.1New capacity of the plant after conversion of H2 and S2 in gear machining

Morning Shifts Evening Shift Night shiftLength of Shift (minutes) 450 450 390Setup time for gear machining (minutes) 120 0 0Total time available for H1 (minutes) 330 450 390Time required for machining of a gear (H1) 5 5 5Number of gears machined per shift (H1) 66 90 78 234Setup time for gear machining (minutes) 60 0 0Total time available for S1 (minutes) 390 450 390Time required for machining of a gear (S1) 3 3 3Number of gears machined per shift (S1) 130 150 130 410Setup time for gear machining (minutes) 120 0 0Total time available for H2 (minutes) 33 45 39Time required for machining of a gear (H2) 5 5 5Number of gears machined per shift (H2) 6 9 7 22Setup time for gear machining (minutes) 60 0 0Total time available for S2 (minutes) 39 45 39Time required for machining of a gear (S2) 3 3 3Number of gears machined per shift (S2) 13 15 13 41Setup time for shaft machining (minutes) 120 0 0Total time available H2 (minutes) 297 405 351Time required for machining of a shaft (H2) 8 8 8Number of shaft machined per shift (H2) 37 50 43 130Setup time for gear machining (minutes) 60 0 0Total time available for S2 (minutes) 351 405 351Time required for machining of a shaft (S2) 5 5 5Number of shafts machined per shift (S2) 70 81 70 221Time available for heat treatment 450 450 390Number of gears heat treated per shift (Max.) 250 250 250 750Time available for heat treatment 450 450 390

Number of shafts heat treated per shift (Max.) 100 100 100 300Setup time for gear finish grinding (minutes) 30 0 0Total time available for finish grinding of a gear FG1+FG2 (minutes) 840 900 780Time required for finish grinding of a gear (FG1+FG2) 2 2 2Number of gears finished per shift (FG1+FG2) 420 450 390 1260Setup time for shaft finish grinding (minutes) 30 0 0Total time available for finish grinding of a shaft FG1+FG2 (minutes) 840 900 780Time required for finish grinding of a shaft (FG1+FG2) 6 6 6Number of shafts finished per shift (FG1+FG2) 140 150 130 420

Therefore, capacity is constrained by number of gears and shaft which can be machined (Hobber) per shift as it is the lowest capacity machine on the floor layout (H1+H2 - 234+22 - 256 gears, H2 - 130 shafts).

Number of gears finished per day 256Number of shafts finished per day 130Number of gearboxes finished per day 64Number of gearboxes finished per month 1600Number of gearboxes finished per year 19200Taking 85% efficiency into account, revised capacity 16320

Therefore, increased capacity of plant is 16320 gearboxes per year.

We propose to convert H2 and S2 to gear machining and use 10% of time on H2 and S2 for gear machining. Rest 90% time will be used for shaft machining.

Therefore, capacity is constrained by number of gears and shaft which can be machined (Hobber) per shift as it is the lowest capacity machine on the floor layout (H1+H2 - 234+22 - 256 gears, H2 - 130 shafts).