Case Problem 1

Workload Balancing

Digital Imaging (DI) produces photo printers for both the professional and consumer markets. The DI consumer division recently introduced two photo printers that provide color prints rivaling those produced by a professional processing lab. The DI-910 model can produce a 4"x6" borderless print in approximately 37 seconds. The more sophisticated and faster DI-950 can even produce a 13"x19" borderless print. Financial projections show profit contributions of $42 for each DI-910 and $87 for each DI-950.

The printers are assembled, tested, and packaged at DI’s plant located in New Bern, North Carolina. This plant is highly automated and uses two manufacturing lines to produce the printers. Line 1 performs the assembly operation with times of 3 minutes per DI-910 printer and 6 minutes per DI-950 printer. Line 2 performs both the testing and packaging operations. Times are 4 minutes per DI-950 printer and 2 minutes per DI-950 printer. The shorter time for the DI-950 printer is a result of its faster print speed. Both the manufacturing lines are in operation one 8 hour shift per day.

Managerial Report

Perform an analysis for Digital Imaging in order to determine how many units of each printer to produce. Prepare a report to DI’s president presenting your findings and recommendations. Include (but do not limit your discussion to) a consideration of the following:

1. The recommended number of units of each printer to produce to maximize the total contribution to profit for an 8 hour shit. What reasons might management have for not implementing your recommendation?
2. Suppose that management also states that the number of DI-910 printers produced must be at least as great as the number of DI-950 units produced. Assuming that the objective is to maximize the total contribution to profit for an 8 hour shift, how many units of each printer should be produced?
3. Does the solution you developed in part (2) balance the total time spent on line 1 and the total time spent on line 2? Why might this balance or lack of it be a concern to management?
4. Management requested an expansion of the model in part (2) that would provide a better balance between the total time on line 1 and the total time on line 2. Management wants to limit the difference between the total time on line 1 and the total time on line 2 to 30 minutes or less. If the objective is still to maximize the total contribution to profit, how many units of each printer should be produced? What effect does this workload balancing have on total profit in part (2).
5. Suppose that in part (1) management specified the objective of maximizing the total number of printers produced each shift rather than total profit contribution. With this objective, how many units of each printer should be produced per shift? What effect does this objective have on total profit and workload balancing?

CASE PROBLEM 3: Hart Venture Capital.

Hart Venture Capital (HVC) specializes in providing venture capital for software development and Internet applications. Currently HVC has two investment opportunities: (1) Security Systems, a firm that needs additional capital to develop an Internet security software package; (2) Market Analysis, a market research company that needs additional capital to develop a software package for conducting customer satisfaction surveys. In exchange for Security System stock, the form has asked HVC to provide $600,000 in year 1, $600,000 in year 2, and $500,000 in year 3 over the coming three-year period. In exchange for their stock, Market Analysis has asked HVC to provide $500,000 in year 1, $350,000 in year 2, and $400,000 in year 3, over the same three-year period. HVC believes that both investment opportunities are worth pursuing. However, because of other investments, they are willing to commit at most $800,000 for both projects in the first year, at most $700,000 in the second year, and $500,000 in the third year.

HVC’s financial analysis team reviewed both projects and recommends that the company’s objective should be to maximize the net present value of the total investment in Security Systems and Market Analysis. The net present value takes into account the estimated value of the stock at the end of the three year period as well as the capital outflows that are necessary during each of the three years. Using an 8% rate of return, HVC’s financial analysis team estimates that 100 percent funding of the Security Systems project has a bet present value of $1,800,000 and 100 percent funding of the Market Analysis project as a net present value of $1,600,000.

HVC has the option to fund any percentage of the Security System and Market Analysis projects.

Price: $31.26

Solution: The downloadable solution consists of 16 pages, 1526 words and 10 charts.
Deliverable: Word Document