Monday 8 June 2009
ALL FIVE questions are compulsory and MUST be attempted
1 Yam Co is involved in the processing of sheet metal into products A, B and C using three processes, pressing,
stretching and rolling. Like many businesses Yam faces tough price competition in what is a mature world market.
The factory has 50 production lines each of which contain the three processes: Raw material for the sheet metal is
first pressed then stretched and finally rolled. The processing capacity varies for each process and the factory manager
has provided the following data:
Processing time per metre in hours
Product A Product B Product C
Pressing 0·50 0·50 0·40
Stretching 0·25 0·40 0·25
Rolling 0·40 0·25 0·25
The factory operates for 18 hours each day for five days per week. It is closed for only two weeks of the year for
holidays when maintenance is carried out. On average one hour of labour is needed for each of the 225,000 hours
of factory time. Labour is paid $10 per hour.
The raw materials cost per metre is $3·00 for product A, $2·50 for product B and $1·80 for product C. Other factory
costs (excluding labour and raw materials) are $18,000,000 per year. Selling prices per metre are $70 for product
A, $60 for product B and $27 for product C.
Yam carries very little inventory.
(a) Identify the bottleneck process and briefly explain why this process is described as a ‘bottleneck’.