Deciding whether to invest or not is a complicated task for today’s companies. Managers need to make thorough studies, analyzing additional costs and revenues, in order to be able to make the most reasonable decision. A big investment implies a great expenditure and, generally, a late return. If a company does not consider thoroughly the requirements and the outcomes of a particular investment, the organization may suffer a big loss and even be severely prejudiced.

Matt Doorman, manager of Great Northern Bunk Beds, Inc, a high-quality custom- made beds manufacturing company, is considering a new big investment. Currently, Doorman only has a small size factory of 700 square feet located in Beltsville which unable the company to install additional equipment and to perform more than one step at a time. The production capacity is, therefore, limited, and that is the reason why Doorman believes that expanding KNOB to Jeep’s is an excellent opportunity.

Jeep’s has some advantages when compared with Beltsville such as a lower rent and more usable space. These characteristics will allow the purchase of new equipment and, consequently, a decrease in operating and setup times besides the possibility of multi-tasking. The report will show the group’s analysis of the manufacturing process, namely, total time per step, per batch and per minutes and the total units produced per week. We will compare the results of Beltsville with Speedup’s, specifically the capacity of production, the flow rate, the sales and the costs.

tify">Finally, we will use the payback method that gives us the length of time required to recover the cost of the investment to determine whether KNOB should engage in it or not. An extended payback time probably make us Matt Doorman not to invest, contrary to a short payback time which would attract him to invest. In the end of the report, we attached 3 tables which were created to calculate important cost for the decision making. Table 1 regards the first location Beltsville, Table 2 regards the new location Jeep’s and, finally, Table 3 presents us the Profit and Loss account. Group 10 operations Management Question 1 Considering the information available on the Beltsville factory, we calculated the total operational time of a batch of only one bunk-bed by multiplying the number of operations of each step by the time that each operation takes to be completed. Afterwards, for the two and the three batch sizes, we simply calculated the double and the triple of that amount. However, to compute the length that one batch takes to be completed, we must take also into account its set-up time.

Therefore, after summing the total operational time with the set-up time, we calculated the time that it takes to manufacture one bunk- bed by dividing the total time of a specific batch by the number of the corresponding attach size. Through the analysis of Table 1, we can see that, although the total time per beach increases with a higher number of bunk-beds produced, the total time per bed decreases. This makes sense considering that the batch’s set-up time will be divided by the number of bunk-bed

produced, even though the total operational time varies with the quantity produced, the set-up time does not.

The worker will, then, save some time as he will not need to waste it setting up the machines for the following bunk-bed. Additionally, we know that each worker works 40 hours per week which corresponds o 2400 minutes. Considering this last value and the number of bunk-beds produced per week, we achieve the number of bunk-beds that one worker can produce per week in the different batch sizes. Our group decided to use the integer number, without the decimals, because we assume that the maximum number of bunk-beds that KNOB can produce corresponds to the finished beds.

Latter, to calculate the revenues that we will obtain with sales, we will see that the decimals can make the difference, as the company is able to sell unfinished beds too. We can use the same explanation as in Beltsville to explain the calculations in Jeep’s as well as the same conclusions. However, Matt Doorman will impose some changes in the productive process thanks to the additional space available. Now the company is able to purchase new equipment that will decrease both operating time and set-up time and also remove the need for planning, despite the increase of sanding and the introduction of an 3 additional step, shaping.

This can be verified by the increase in the number of bunk- beds produced in a week, that is now nine, even if the number is independent of the attach size. Question 2 To answer the second question we will use similar procedures to the one conducted above. Now the difference is that we have two workers instead of one, which will allow KNOB to increase the production’s capacity in the firm. We will assume that an additional worker will enable the division of operations’ time per two, that is, a decrease of 50% in the total operational time of each batch.

Regarding the new location Jeep’s, the factory will now be able to have a process with multiple tasks. This meaner that two workers can work in two different tasks at the same time. However, considering that the group decided to assume that the additional worker will imply a decrease in every operation’s time of 50%, it makes no difference having two workers doing different steps simultaneously. If the second worker focus on a different task, the total time the first will take to perform the step will be the same as having only one worker.

There would not be any additional benefit and for this reason we do not take into consideration the opportunity of multiple tasking. When calculating the values in the table, we also assumed that the set-up time will to be influenced by the number of workers and it will remain constant Just as we did when increasing the number of bunk-beds per batch. Consequently, in terms of computations, the only difference from Question 1 is the division of the total operational time by two before adding the set-up time.

This will enable a shorter time to produce one bunk-bed and, therefore,

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