Reference no: EM132500702

Point 1: Easy Rider Ltd. makes small motorcycles. The monthly demand for these motorcycles ranges from 80 to 100 motorcycles. The average demand is 92 motorcycles. The plant operates 300 hours a month. Each cycle takes approximately 1.5 hours to complete.

Point 2: If the company adds a new line of scooters, initial demand will be 20 per month. Each scooter will take 1 hour to make. To offsets approaching production capacity, expanding the assembly line is possible. This will decrease manufacturing time for all products by 20 percent. However, this will increase the costs of motorcycle from $ 400 to $500 and scooter from $200 to $240. The change will also cause increase in price from $700 to $750 for motorcycles and from $450 to $500 for scooters.

Calculate

Question a) What is the average waiting time for motorcycle if they are the only item manufactured.

Question b) What is the average waiting time if both motorcycles and scooters are produced and the assembly line is not enlarged.

Question c) What is the average waiting time if both motorcycle and scooters are produced and the assembly line is enlarged.

Question d) What is the expected monthly margin without scooters if the company sells all 92 motorcycles it manufactures.

Question e) What are the expected monthly contribution margins if scooters are made with the current assembly line and with the new assembly line? assuming average sales and that sales equal production.

Question f) What action do you recommend.