Problem
As the financial consultants of Catawba Industrial Company our aim is to determine the best course of action to pursue with respect to the introduction of the new proposed light weight compressor. This course of action must remain within the production capacity restrictions the company faces.

Alternatives
Status Quo:
The company will continue to produce the standard compressor to satisfy the requirements for the automatic paint system and the demand that currently exists for this product.
Introduce Light Weight Compressor: The company will introduce the new light weight compressor to replace the standard unit in the automatic paint system and to satisfy any demand that might exist through industrial distributors.
Mixed …show more content…

Explanation: In order to determine the capacity for standard compressors when assuming that 10 light weight compressors are used as a component for the company, we would determine the total hours used to produce 10 light weight compressors which would be a total of 625 hours. This would then be deducted by the total time of 2400 hours, which is the capacity hours worked per week. From the information provided we know that it takes 100 hours to produce one unit of standard compressors, thus would be divided into the maximum hours remaining to produce standard compressors which would be 1775 hours. This would leave you with the capacity of 17.75 units per week, of standard compressors, when assuming 10 light weight compressors are used for the company.

Product Mix #4 Equation Capacity

1)10 Standard Compressors

2) Light Weight Compressors

10 units ×100 hours
=1000 hours

2400 hours-1000 hours
=1400 hours

(1400 hours)/(62.5 hours)

=22.4units The total capacity for producing light weight compressors when assuming the production of 10 standard compressors produced each week were required as a component for the automatic paint systems sold by the company is 22.4 units.

Explanation: In order to determine the capacity for light weight compressors when assuming that 10 standard compressors are used as a component for the company, we would determine the total