Enterprises runs in perfect business environment

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Reference no: EM132190257

XY Enterprises runs in a perfect business environment. That means that Murphy does not exist (i.e. there is no uncertainty or unexpected, negative events, nothing can or will go wrong). Everything is known exactly, and no deviation from the known numbers occurs, unless we consciously change them. This should make it a very easy environment to manage.

Demand Selling price

Product X 60 units/week R95-00/unit

Product Y 60 units/week R105-00/unit

The above table is the master delivery schedule (a planned schedule of which products to produce at what time) for the company based on information from the market itself. The demand for the products is absolutely stable, the customers will not change their minds with regards to what they want and the quantity they want. The selling prices charged are at an optimum as a cent increase in either of the selling prices will cause the demand for both products to drop to zero. Also, if a selling price is reduced, the volume will stay exactly the same.

There is one of each resource A, B, C and D (in other words there are four resources doing the work); each resource performs two processes (e.g. resource A performs processes (A-1 and A-2). Resources cannot substitute for each other. A resource does not lose any time when switching over from one process to another. 2. Each resource is available for 2400 minutes per week. (No delays, no strikes, no setups, no public holidays!). 3. Fixed cost is R1 500-00 per resource per week or R6 000-00 total cost per week. 4. There are no other overhead costs. 5. Raw material (RM) supply is instantaneous (zero lead time) and both the quality and quantity are perfect. The supplier will not raise the price of raw material at any time. 6. Each resource works on only one product at a time (delivery from C-2 is either to product X or to product Y). To supply one output from C-2 to each final product process D-1 and D-2, C-2 thus has to be performed twice. Processing time is constant (no process time variation).

Which one of the two products, X or Y is the most profitable product for XY enterprises? Provide answer based on your calculations.

Reference no: EM132190257

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