A Company That Produces Diet Supplements Using a Highly Automated

question 8

Essay

A company that produces diet supplements using a highly automated packaging process has the following production and revenue alternatives for three products A, B, and C) that are feasible to produce with existing plant and equipment:

TR is in thousands of dollars per month. Total cost for the first shift is $200,000 per month - of which $120,000 is labor, $60,000 is other variable costs, and $20,000 is fixed cost. As the number of shifts is increased, fixed cost remains at $20,000 per month while variable costs other than labor remain the same per shift. For the second shift, labor must be paid 1.2 times the amount paid on the first shift. For the third shift, labor must be paid 1.4 times what it receives in the first shift.
a. Determine total cost for the two-shift and three-shift alternatives.
b. Indicate the product combination and shift level that maximizes profit.

---

Definitions:

Performance Level

A measure of the efficacy, efficiency, or quality of an individual's or organization's work output.

Self-Serving Bias

A cognitive bias that leads individuals to attribute their successes to internal factors while blaming external factors for their failures.

Personal Failures

Instances where an individual fails to meet their own standards or expectations, impacting their perception of self-worth or ability to succeed.

External Causes

Factors outside an individual's or organization's control that can affect outcomes or performance.