THE BUSINESS GAME | My Assignment Tutor

CASE 3 – 2 THE BUSINESS GAME Bonnie Muio had just been promoted to the new job of production manager – games and toys for Thunderbird Manufacturing Company. For the past seven years, Bonnie had served as a production supervisor in another division of Thunderbird. The company had several well established product lines and decided it was time to diversify into new areas. Muio’s supervisor, the general production n manager, asked her to work with the new production manager, John Love, on the latest product code-named The Business Game. The Business Game was a new adult game that the marketing department was of the belief that it would be immensely popular product, competing with games like Trivia Pursuit and Pictionary A Thunderbird staff member, Jane Matheson, informed Muio that the basic tasks to be performed were assembling components purchased from other manufactures. Thee assembly operation could be performed in any order. In her many attempts, Jane was able to assemble a complete Business Game in 15 minutes. Matheson also discovered that if three workers each assembled two of the six operations required, they could assemble the game in half the time. If one worker worked by themselves they could produce 32 complete games a day, but three workers working together could produce 192 complete Business Games per day. Muio received the details on the time requirements and material costs of the components required for assembly as indicated in Exhibit 1. All materials could be obtained within a week of being ordered. On occasion it sometimes took two weeks to be delivered. The vice president of finance had sent a memo to the managers asking to keep inventories to a minimum because costs for the company had risen substantially. The vice president also requested that he be informed of all investment needs exceeding $40,000. The community had a reasonable supply of semi-skilled workers. The starting wage at Thunderbird was $11.65 per hour including benefits. Working hours were from 7:30 am to 4:00 pm with a half hour for lunch. On the average each worker earned $93.20 a day. Considering there were on average 20 working days per month, this worked out to $1,864 per month. Muio was told that she could hire as many workers as she thought they needed and pay them on what ever basis she wished, as long as she did not exceed the plant average of $12.00 per hour for regular time and time and a half for overtime. Muio was allotted a plant space of 20 metres by 5 metres and was told she could arrange the operations anyway she wanted. Her department would be charged $48.00 per square metre annually for this space. Additional space was available beyond the original 100square metres but would cost the department $72.00 per square metre. The raw material inventory ( at $20.00 per unit) and finished goods inventory (valued at material costs plus the cost of labour) would require roughly the same area. Because the boxes were fairly bulky, Bonnie figured she could store the equivalent of 60 completed units of The Business Game on each square metre of floor space, assuming she could pile them as high as possible. Jane Matheson told Muio that she figured they would require 50 square metres of space for assembly operations, including tables, work stations, lockers, etc.. Other fixed manufacturing overhead costs associated with The Business Game were estimated to be $4,120 per month. The new product manager told Muio that the forecasted demand for The Business Game, for at least the first year was 3,600 units per month, with a range from 3,000 to 4,000 on any given month. Love stressed that Muio was expected to avoid stock-outs because The Business Game would in essence be an impulse purchase, and stock-outs could be very costly. The intended selling price would be set at $25.00 per unit. The marketing department estimated its fixed costs (mostly for packaging design, advertising and point of sale displays) to be $40,000. Muio was also told that one of her suppliers, Magnum Plastics, had submitted a quote of $23.00 per completed unit for a year’s supply of The Business Game for Thunderbird. Their quality was not considered to be as good as Thunderbird’s, but they were prepared to provide delivery on any schedule desired by Thunderbird. Unfortunately they also stated that delivery could be delayed from one to four weeks depending on how busy they were. EXHIBIT 1 TIME AND MATERIAL COSTS TIME REQUIRED (MINUTES) Assembly Operation one person alone three person team material costs A 1 0.5 $1.00 B 4 2 2.50 C 2 1 0.50 D 2 1 1.00 E 3 1.5 5.00 F 31.510.00 15 7.5 $20.00


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