Q 3.6 VALLEY FORGE SOLUTION

Flow unit for the exercise is minute

Input >> Assume that all three persons work eight hours per day and 20 days a month.

= 8 hrs*20 days*60 minutes/hr = 9600 minutes a month

Input>> Administrative support person: filing and writing.

Input>> Senior accountant (who is also the owner): initial meeting, review by senior accountant.

Input>> Junior accountant: preparation.

Process Flow Diagram

GROUP 1

Input >> Group 1 (new customers, easy): 15 percent of cases; 0.15

Input>> Assume that there are 50 income tax statements arriving each month.

Group Filing initial meeting

PreparationReview by

senior accountant

Writing

1 20 30 120 20 50

Administrative Support Person: Filing 20 minutes + Writing 50 minutes = 70 minutes

Work load: 70 minutes *50 returns*0.15 percent = 525

Senior Accountant: Initial meeting 30 minutes + Review by senior Accountant 20 minutes = 50 minutes

Work load: 50 minutes *50 returns*0.15 percent = 375

Filing

Tax Statements

PrepReview

by Sr. AccWriting

Initial Mtng

Group 1

Group 2

Group 3

Group 4

Junior Accountant: preparation 120 minutes = 120 minutes

Work load: 120 minutes *50 returns*0.15 percent = 900

GROUP 2

Input >> Group 2 (new customers, complex): 5 percent of cases; 0.05

Input>> Assume that there are 50 income tax statements arriving each month.

Group Filing initial meeting

PreparationReview by

senior accountant

Writing

2 40 90 300 60 80

Administrative Support Person: Filing 40 minutes + Writing 80 minutes = 120 minutes

Work load: 120 minutes *50 returns*0.05 percent = 300

Senior Accountant: Initial meeting 90 minutes + Review by senior Accountant 60 minutes = 150 minutes

Work load: 150 minutes *50 returns*0.05 percent = 375

Junior Accountant: preparation 300 minutes = 300 minutes

Work load: 300 minutes *50 returns*0.05 percent = 750

GROUP 3

Input >> Group 3 (repeat customers, easy): 50 percent of cases; 0.50

Input>> Assume that there are 50 income tax statements arriving each month.

Group Filing initial meeting

PreparationReview by

senior accountant

Writing

3 20 0 80 5 30

Administrative Support Person: Filing 20 minutes + Writing 30 minutes = 50 minutes

Work load: 50 minutes *50 returns*0.50 percent = 1250

Senior Accountant: Initial meeting 0 minutes + Review by senior Accountant 5 minutes = 5 minutes

Work load: 5 minutes *50 returns*0.50 percent = 125

Junior Accountant: preparation 80 minutes = 80 minutes

Work load: 80 minutes *50 returns*0.50 percent = 2000

GROUP 4

Input >> Group 4 (repeat customers, complex): 30 percent of cases; 0.30

Input>> Assume that there are 50 income tax statements arriving each month.

Group Filing initial meeting

PreparationReview by

senior accountant

Writing

3 40 0 200 30 60

Administrative Support Person: Filing 40 minutes + Writing 60 minutes = 100 minutes

Work load: 100 minutes *50 returns*0.30 percent = 1500

Senior Accountant: Initial meeting 0 minutes + Review by senior Accountant 30 minutes = 30 minutes

Work load: 30 minutes *50 returns*0.30 percent = 450

Junior Accountant: preparation 200 minutes = 200 minutes

Work load: 200 minutes *50 returns*0.30 percent = 3000

Total Work Load & Implied Utilization

Administrative Support Person: Group 1 525 minutes + Group 2 300 minutes + Group 3 1250 minutes + Group 4 1500 minutes = 3575 minutes

Implied utilization: Total Work load/minutes per month: 3375/9600 = 0.37%

Senior Accountant: Group 1 375 minutes + Group 2 375 minutes + Group 3 125 minutes + Group 450 minutes = 1325 minutes

Implied utilization: Total Work load/minutes per month: 1325/9600 = 0.14%

Junior Accountant: Group 1 900 minutes + Group 2 750 minutes + Group 3 2000 minutes + Group 4 3000 minutes = 6650 minutes

Implied utilization: Total Work load/minutes per month: 6650/9600 = 0.69%

Staff Minutes per month

Group 1; New Customers Easy

Group 2; New Customers Complex

Group 3; Repeat Customers Easy

Group 4; Repeat Customers Complex

Total work-load

Implied utilization

Administrative Support Person 9600 525 300 1250 1500 3575 0.372396

Senior Accountant 9600 375 375 125 450 1325 0.138021

Junior Accountant 9600 900 750 2000 3000 6650 0.692708

QUESTIONS

a. Which of the three persons is the bottleneck?

The junior Accountant with the highest implied utilization is the bottleneck

b. What is the (implied) utilization of the senior accountant? The junior accountant? The administrative support person?

Senior Accountant: 0.138; Junior Accountant: 0.692; The administrative person: 0.372

c. You have been asked to analyze which of the four product groups is the most profitable. Which factors would influence the answer to this?

If we assume VF charges the same amount for each tax statement Then Group 2: New Customers Complex is the most profitable group. Because it takes the lowest amount of time from all the resources available with the company.

d. How would the process capacity of VF change if a new word processing system would reduce the time to write the income tax statements by 50 percent?

We have already established that Junior Accountant with highest implied utilization is the bottleneck. Writing is done by Administrative person. Her implied utilization drops to 25.6% from 37.2% shown below. The capacity is probably not impacted greatly.

Staff Minutes per month

Group 1; New Customers Easy

Group 2; New Customers Complex

Group 3; Repeat Customers Easy

Group 4; Repeat Customers Complex

Total work-load

Implied utilization

Administrative Support Person(Actual) 9600 525 300 1250 1500 3575 0.372396

Administrative Support Person (with Word Processing System)

9600 337.5 200 875 1050 2462.5 0.256510