Module 2 Homework Solutions

Posh Nails
PN1. S1: 1min; S2: 8min; Dryer chair: 10min; S3: 4min
Bottleneck: The dryer chair
PN2. Flow rate/capacity = (1/10) / (1/8) = 8/10 = 0.8
PN3. (1+8+4)/(13 + (9+2+6)) = 3/30 = 0.433
PN4. Direct labor cost = wage rate per hour / flow rate per hour = $36 per hour / 6 customers
per hour = $6 per customer

Butternut
BN1. Use Littles Law: 1296 skiers/hour*5/60 = 108 skiers

Tech Co.
TC1.
COGS = Revenue*(1-gross margin)
$ 155,000,000*(1-0.29) = 110,050,000
COGS/Inventory = Inventory Turns
110,050,000/20,000,000 = 5.5
TC2.
Annual Inventory cost of MP3s = Cost of MP3s sold*Inventory cost
Assuming the margin for the MP3 player is the same as for the rest of the firm, the MP3 player
is purchased for $35.50
Per unit Inventory cost of MP3s = Annual Inventory Cost of MP3s/Inventory Turns
$35.50*.35/5.5 = $2.26

Gamer Co.
GC1.

Paper screening
Design & Production
Testing
Focus group
Final decision
RESULT

Activity capacity
(ideas/hr)
3/2
1
6/(2*8)=.375
1/2
1/3

Demand
(ideas/hr)
25/5/8
25/5/8 *0.6
25/5/8 *0.6
25/5/8 *0.6*0.5
25/5/8 *0.6*0.5*0.35
25/5/8
*0.6*0.5*0.35*0.75

Implied utilization
41.7%
37.5%
100 %
37.5%
19.7%

This would be 25*0.6*0.5*0.35*0.75 = 1.97 ideas/week.

ANSWER: __1.97 _

idea(s)/week

GC2.
ANSWER: Testing .

GC3.
At the testing stage, only 0.375 ideas/hour will make it through.
So this means 0.375 * 0.5 * 0.35 * 0.75 = .049 ideas/hour or 1.96 ideas/week will be put into
production.
Note that this is the same as the unconstrained amount in question GC1 (no implied utilization
exceeds 100%).