- Lambda Manufacturing's bottleneck operation currently processes 100 units per 8-hour shift with 95% quality yield, generating $50 contribution margin per good unit. Engineering proposes two alternatives: Option 1 increases processing speed to 120 units per shift while maintaining 95% yield. Option 2 maintains 100 units per shift but improves yield to 98%. Both options cost $300,000 annually. Which option better improves throughput performance?
Answer: Option 1 generates $950 additional daily contribution compared to $150 for Option 2
When analyzing bottleneck improvements in manufacturing, you need to focus on throughput contribution—the additional profit generated by increasing the flow of good units through the constraint. The key is calculating the incremental daily contribution margin from each option.
Let's calculate the current and proposed performance. Currently, Lambda produces 100 units × 95% yield = 95 good units per shift, generating 95 × $50 = $4,750 contribution per shift.
Option 1 increases speed: 120 units × 95% yield = 114 good units per shift, generating 114 × $50 = $5,700 contribution. The additional daily contribution is $5,700 - $4,750 = $950.
Option 2 improves quality: 100 units × 98% yield = 98 good units per shift, generating 98 × $50 = $4,900 contribution. The additional daily contribution is $4,900 - $4,750 = $150.
Option 1 generates $950 additional daily contribution compared to $150 for Option 2, making C correct.
Answer A reverses the comparison incorrectly. Answer B switches which option generates which amount—a classic trap that tests whether you're carefully tracking your calculations. Answer D ignores the throughput analysis entirely by focusing only on implementation costs, missing the point that equal costs don't mean equal benefits.
For bottleneck problems, always calculate the impact on good units produced and multiply by contribution margin per unit. Don't get distracted by equal implementation costs—focus on the incremental profit each option generates through improved throughput.
- Sigma Corp's assembly line has five workstations with the following cycle times: Station 1 (3 min), Station 2 (5 min), Station 3 (4 min), Station 4 (6 min), Station 5 (3 min). Management can add a parallel workstation to any single station for $200,000, reducing that station's effective cycle time by 50%. If the current contribution margin is $180 per unit and the plant operates 2,000 hours annually, which investment provides the highest return on bottleneck improvement?
Answer: Add parallel capacity to Station 4, increasing throughput from 10 to 12 units per hour for $72,000 additional annual contribution
Station 4 (6 min) is the bottleneck, limiting throughput to 10 units/hour. Adding parallel capacity reduces Station 4's time to 3 min, but Station 2 (5 min) becomes the new bottleneck at 12 units/hour. Additional throughput: (12-10) × 2,000 × $180 = $72,000. Choice B incorrectly assumes Station 2 is the current bottleneck. Choice C miscalculates the new bottleneck after Station 4 improvement. Choice D ignores that Station 1 is not the bottleneck.
- Zenith Manufacturing has three production lines feeding into a single packaging station that can process 1,200 units per hour. Line A produces 500 units/hour with a contribution margin of $8 per unit, Line B produces 400 units/hour with a contribution margin of $12 per unit, and Line C produces 450 units/hour with a contribution margin of $6 per unit. If customer demand exceeds total production capacity, which strategy will maximize throughput contribution?
Answer: Prioritize Line B first, then Line A, then Line C based on contribution margin per hour of bottleneck capacity
The packaging station is the bottleneck at 1,200 units/hour. To maximize throughput, prioritize based on contribution per bottleneck hour: Line B = $12 × 400 = $4,800/hour, Line A = $8 × 500 = $4,000/hour, Line C = $6 × 450 = $2,700/hour. Choice A incorrectly uses contribution per unit rather than contribution per bottleneck hour. Choice B ignores profit maximization. Choice C focuses on units rather than contribution.
- Based on the information in the passage, what constraint determines Gamma's maximum daily throughput when operating all departments simultaneously?
Answer: The packaging line's capacity constrains throughput to 1,500 units per 10-hour shift regardless of upstream production
When all departments run simultaneously, they produce (180+120+200) × 10 = 5,000 units per shift, but the packaging line can only handle 1,500 units. The packaging line becomes the system bottleneck. Choice A incorrectly identifies Department B as the constraint when it's actually part of combined upstream capacity. Choice C correctly notes the capacity mismatch but focuses on inventory rather than identifying the binding constraint. Choice D misunderstands that departments operate independently, not sequentially.
- Omega Manufacturing operates a bottleneck machine 8 hours daily with setup times of 1 hour for Product A and 2 hours for Product B. Product A processes 10 units/hour after setup with $15 contribution margin per unit. Product B processes 6 units/hour after setup with $30 contribution margin per unit. If demand exists for both products and the machine can only be set up once per day, which production strategy maximizes daily throughput contribution?
Answer: Produce Product B because it generates higher total daily contribution of $1,080
Product A: (8-1) × 10 units × $15 = 70 units × $15 = $1,050. Product B: (8-2) × 6 units × $30 = 36 units × $30 = $1,080. Product B generates higher total contribution despite lower volume. Choice A ignores contribution margin differences. Choice B provides correct reasoning but doesn't show the calculation. Choice C incorrectly calculates Product A as superior.
