The Northern Manufacturing Company Is Producing Two Types of Products

Multiple Choice

The Northern Manufacturing Company is producing two types of products: A and B. Demand forecasts for next year and other production- related information are provided in the following table:
$$\begin{array} { l | c | c } & \text { Product A } & \text { Product B } \\\hline \text { Demand forecast (units/yr) } & 4000 & 12000 \\\text { Batch size (units/batch) } & 80 & 150 \\\text { Standard processing time (hr/unit) } & 25 & 2.0 \\\text { Standard setup time (hr/batch } & 18 & 24\end{array}$$
Both of these products are produced at the same workstation, called the Automatic Lathe. Currently, the company has 12 automatic lathes, and financial constraints prevent any expansion for the next year. It works 250 days per year with two 8- hour shifts and desires a 25 percent capacity cushion. Which one of the following alternatives will allow next year's demand to be fully covered?

A) Decrease the capacity cushion by 1 percent.
B) Increase the capacity cushion to 30 percent.
C) Increase the batch size of product B to 300 units.
D) Do nothing.