Question

Question 3 (24 points) The Electro-Poly Corporation is the world’s leading manufacturer of slip rings. A slip ring is an electrical coupling device that allows current to pass through a spinning or rotating connection—such as a gun turret on a ship, aircraft, or tank. The company recently received a $750,000 order for various quantities of three types of slip rings. Each slip ring requires a certain amount of time to wire and harness. The following table summarizes the requirements for the three models of slip rings. Unfortunately, Electro-Poly does not have enough wiring and harnessing capacity to fill the order by its due date. The company has only 10,000 hours of wiring capacity and 5,000 hours of harnessing capacity available to devote to this order. However, the company can subcontract any portion of this order to one of its competitors. The unit costs of producing each model in-house (including direct labor, direct materials and other related costs) and buying the finished products from a competitor are summarized in the following table. Electro-Poly wants to determine the number of slip rings to make and the number to buy in order to fill the customer order at the least possible cost.

a) How much can the unit cost of making model 1 slip rings increase before it becomes more economical to buy some of model 1 slip rings? Explain.
b) If the cost of buying model 2 slip rings decreased to $88 per unit, how would the optimal solution change (product mix, product quantities and objective function value)? Explain.
c) Assume workers in the wiring area normally make $12 per hour and get 50% more when they work overtime. Should Electro-Poly schedule these employees to work overtime to complete this job? Explain.
d) Assume workers in the harnessing area normally make $12 per hour and get 50% more when they work overtime. Should Electro-Poly schedule these employees to work overtime to complete this job? Explain.
e) Suppose a worker who performs harnessing calls in sick. Now eight fewer hours are available for harnessing hours. How would the optimal solution change (product mix, product quantities and objective function value)? Explain.

Answer 1

The student's question requires analyzing a business situation to optimize production and minimize costs in the context of limited capacity and outsourcing options. Without specific data, it is not possible to provide a precise numerical answer, but general theoretical concepts and a methodology for solving such a problem have been described.

Step-by-step explanation:

The question posed by the student is a complex business scenario involving concepts of operations management, decision making based on costs, and the trade-off between in-house production and outsourcing. Unfortunately, the necessary data to provide an accurate answer is not provided within the question or accompanying information. Therefore, it is not possible to offer a precise solution in this instance.

However, theoretically, answer (a) relates to a cost-benefit analysis determining the breakpoint at which the cost of making model 1 slip rings in-house exceeds that of purchasing from a competitor. Answer (b) would require a reassessment of the optimal product mix considering the reduction in the purchase price of model 2 slip rings. Answer (c) and (d) involve calculations comparing the cost of overtime pay against the benefits of fulfilling the customer order on time. Lastly, answer (e) explores the impact on the optimal solution when harnessing capacity is reduced due to illness-related staff shortage.