Custom Shirts - Business Plan Example

Actual Cycle Time (min. per shirt) Actual Cycle Time = Total shirts produced/Production run time Total standard-sized shirts = 16,000 per month

Production run time = 64* (8*20) = 10,240 hours per month

Therefore, Actual Cycle Time = 16,000/10,240 = 1.56 minutes per shirt Total custom shirts produced =18,000

Production run time = 65*(8*20) = 10,400

Actual Cycle Time = 18,000/10,400

= 1.73 minutes per shirt Total custom shirts produced =16,000

Production run time = 49*(8*20) = 7,840

Actual Cycle Time = 16,000/7,840

=2.04 minutes per shirt Total custom shirts produced =2000

Production run time = 49*(8*20) = 7,840

Actual Cycle Time = 2,000/7,840

=0.26 minutes per shirt

Manufacturing Lead Time (days) =total time needed to manufacture a shirt and deliver to client = 5 days =5days = 5 days = 3 days

WIP inventories (shirts) = sum of average WIP (from cutting to packaging) =(16+144+12+12+12)*60

= 11,760 shirts =(36+288+24+24+24)*5

= 1,980 shirts =(16+108+9+9+9)*60

=9,060 shirts =(16+108+9+9+9)*60

=9,060 shirts

Production Capacity (Shirts per day) Production capacity = total shirts produced per month/number of days per month 16,000/20

=800 shirts 18,000/20

=900 shirts 16,000/20

=800 shirts 2000/20

=100 shirts

Capacity Utilization Capacity Utilization = (Actual level of output/Maximum possible output)*100 (16,000/18,000)*100

= 88.9% (18000/18,000)*100

=100% (16,000/18,000)*100

= 88.9% (2,000/18,000)*100

=11.1%

Direct Labor Content (min. per shirt) = the time sum of all process = the time sum from making a collar to packaging

= 25.51 minutes per shirt =(25.51*65)/60

= 27.64 minutes per shirt

= the time sum from making a collar to packaging

= 25.51 minutes per shirt = (25.51*49)/60

= 20.83 minutes per shirt

Direct Labor Utilization = direct labor/total labor cost =($2.6/$4.5) * 100

=0.578*100

=57.8% = ($2.8/$4.5)*100

= 62.2% =($2.6/$4.5) * 100

=0.578*100

=57.8% = ($2.1/$4.5)*100

= 46.7%

Direct Labor Cost ($ per shirt) = direct labor hourly rate * direct labor hours required to finish one shirt =$6*(25.51/60)

=$2.551

Rounded off = $2.6 = $6*(27.64/60)

= $2.764

Rounded off

=$2.8 =$6*(25.51/60)

=$2.551

Rounded off = $2.6 =$6*(20.83/60)

= $2.083

Rounded off = $2.1

Question 2

Based on the computations above, Mikes plan seeks to combine the productions of custom and regular shirts whereas Ike aims to keep the production separate. Evidently, the two programs differ significantly. In particular, Mikes plan actual cycle plan will consume only 1.73 minutes per shirt while that of Ike will use a total of 2.3 minutes per shirt (2.04 + 0.26 minutes). Their WIP inventories, 1980 versus 9060, capacity utilization, 88.9% versus 11.1%, direct labor content, 26.74 minutes versus 46.34 minutes, direct labor utilization, 57.8% versus 46.7%, and direct labor costs of $2.8 versus $4.7 respectively also differ. Nevertheless, the production in capacity for shirts per day is similar to both plans at 900 shirts per day.

Based on this analysis, I would recommend John Taylor to adopt Mikes plan. Moreover, this plan seeks to combine the production of regular and custom shirts, which will lower the WIP inventories, utilize capacity efficiently, and apply lesser direct labor content and costs than Ikes plan despite the introduction of a new machine and an additional employee. Notably, lower costs would ensure John Taylor to attain his goal of keeping capital expenditures at bay as well as to attain the expected wholesale and retail prices. In summary, Mikes plan would be the best option for Taylor Shirts, Inc.