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Amar Manufacturing (AM)

Amar Manufacturing (AM) has an opportunity to bid on a contract to produce an electronic assembly. AM could use excess assembly capacity as its main production facility. The contract would require delivery within two years of 30,000 units. AMs engineers suggest an assembly line comprising nine tasks, as given in the following table: Task Time Required Task (in minutes) Predecessors A B C D E 2 6 2 5 3 G G B,D A,F D Task Time Required Task (in minutes) Predecessors F G H I 4 3 2 4 G I C,E none

Assembly would occur on one shift with average productive time of 7.5 hours per employee daily (allowances for breaks, fatigue, shutdowns, etc.). There would be 22 productive days monthly. Direct labour costs are Rs. 9/hour; variable overhead is estimated at 10 percent of direct labour; direct materials are Rs. 12/unit; initial tooling for the project is Rs. 1,00,000, and semi-fixed of manufacturing for the assembly line are estimated at Rs. 7,000/month. For such contractual commitments, AM desires a 15% profit margin on the selling price. Should AM submit a bid and, if so, at what selling price?