Question 1

Table 1
Current
Process
Regular Shirts1
Actual Cycle Time (min./shirt)
Manufacturing Lead Time (days)
WIP Inventory (shirts)
Production Capacity (shirts/day)
Capacity Utilization
Direct Labor Content (min./shirt)
Direct Labor Utilization
Direct Labor Cost ($/shirt)

See Exhibit 1 for calculations

See Exhibit 2 for calculations

See Exhibit 3 for calculations

See Exhibit 4 for calculations

0.6
14.7
11760
960
83.33%
26.51
69.04%
3.84

Mike's Plan

Ike's Plan

Regular &
Regular3 Customized4
Customised2
0.533
0.67
4.80
2.2
11.33
0.5
1980
9060
50
960
720
123.08
93.75%
111.11%
81.25%
27.01
26.51
26.01
77.91%
81.15%
33.87%
3.47
3.43
7.68

Question 2
Table 2
Mike's Plan
Regular
Raw materials cost ($)
Direct labor cost ($)
Indirect labor cost ($)
Other Indirect Cost ($)
Total manufacturing Cost ($)a
Wholesale Price ($)
Profit/ shirt ($)b
Number of shirts manufactured/month
Total Profits ($)c

7
3.47
0.66*
4.50
15.63
25
9.37
16000

Customized
7.7**
3.47
0.66*
4.50
16.33
43.75***
27.42
2000
204820

Ike's Plan
Regular
7
3.43
0.66*
4.50
15.59
25
9.41
16000

Customized

7.7**
7.68
0.66*
4.50
20.54
43.75***
23.21
2000
196981

* From Exhibit 4 in Case, Total Labor cost (Direct + Indirect) = $4.50

From Table 1 above, Direct cost for current process = $3.84
Therefore, indirect cost = 4.50-3.84 = $0.66
** Raw material costs are 10% higher for customized shirts due to higher scrap rate.
*** Customized shirts sell for 75% higher than regular shirts.
a: Total manufacturing cost = Raw materials cost + Direct labor cost + Indirect labor cost + Other
Indirect Cost
b: Profit/ Shirt = Wholesale Price - Total manufacturing cost
c: Total Profits = Number of shirts manufactured/month x Profit/ shirt (Regular + customized)

Conclusion:
From the above analysis, it can be concluded that Mikes process is more profitable than Ikes process
and provides $7839 more in profits. Also, the overtime costs for the 4 material handlers have not been
considered for Ikes process which will further decrease the profits for Ikes process.
The Manufacturing Lead Time for Mikes process is also considerably lesser compared to both the
industry standard of a minimum of 6 weeks and Ikes process. This will ensure Colliers plan to deliver
customized shirts to customer within 10 days is met.
Based on these factors, our recommendation to Dwight Collier is to implement Mikes process to offer
customized shirts to its customers.
2

Exhibit 1
Calculations for current process:

Current Process
Operation

Regular Shirt
Labour Content

Make Collar
Make Cuffs
Make Sleeves
Make Front
Make Back
Join Shoulder
Attach collar
Attach sleeves
Stitch Down sleeves
Sew Side seam
Attach cuffs
Hem Button
Inspect
Iron
Fold Package

3.9
2
0.65
2.5
1.7
0.66
1.65
1.55
0.65
1.8
1.55
1.7
1.5
1.95
1.75

Current Process
Ideal Cycle Time
0.5
Actual production
16000
Number of shirts/day
800
Number of shirts/hour
100
Number of shirts/min
1.67
Actual Cycle time
0.6
Average WIP total
196
Number of shirts in a batch
60
WIP inventory
11760
Time available for production/day
480
Ideal Production capacity
960
Actual Production capacity
800
Capacity Utilisation
83.33%
Manufacturing Lead Time
14.7
Cutting Set-up time
90
Cutting and removing
30
Total cutting time
120
Number of layers
60
Number of patterns
8
No. of shirts/ batch
480
Cutting minutes/ shirt
0.25
No of workers for cutting
4
labor content for cutting
1
All other labor content
25.51
Labor content
26.51
Number of workers
64
Total available time
30720
Time taken to produce shirts
21208
Labor Utilisation
69.04%
Daily wage for workers
3072
Labour Cost
3.84

Time required for

Number of
producing one unit (in
workers
min.)
8
4
2
6
4
2
4
4
2
4
4
4
4
4
4

0.49
0.50
0.33
0.42
0.43
0.33
0.41
0.39
0.33
0.45
0.39
0.43
0.38
0.49
0.44

min/shirt
shirts/month
shirts/day
Shirts/hour
Shirts/min
min/shirt
Batches
Shirts/ batch
Shirts
Minutes
Shirts
Shirts
days
min/batch
min/batch
min/batch

Shirts/batch
Min/ shirt
Min/shirt
Min/shirt
Min/shirt
min
min
$/day
$/shirt

Exhibit 2
Calculations for Mikes process (Regular + Customized):

Mike's process
Operation
Make Collar
Make Cuffs
Make Sleeves
Make Front
Make Back
Join Shoulder
Attach collar
Attach sleeves
Stitch Down sleeves
Sew Side seam
Attach cuffs
Hem Button
Inspect
Iron
Fold Package

Number Time required for

Regular Shirt
of
producing one
Labour Content
workers unit (in min.)
3.9
2
0.65
2.5
1.7
0.66
1.65
1.55
0.65
1.8
1.55
1.7
1.5
1.95
1.75

8
4
2
6
4
2
4
4
2
4
4
4
4
4
4

0.49
0.50
0.33
0.42
0.43
0.33
0.41
0.39
0.33
0.45
0.39
0.43
0.38
0.49
0.44

Mike's process
Ideal Cycle Time
Actual production
Number of shirts/day
Number of shirts/hour
Number of shirts/min
Actual Cycle time
Average WIP total
Number of shirts in a batch
WIP inventory
Time available for production/day
Ideal Production capacity
Actual Production capacity
Capacity Utilisation
Manufacturing Lead Time
Cutting Set-up time
Cutting and removing
Total cutting time
Number of layers
Number of patterns
No. of shirts/ batch
Cutting minutes/ shirt
No of workers for cutting
labor content for cutting
New machine cutting time
Number of layers
New machine labor content
All other labor content
Labor content
Number of workers
Total available time
Time taken to produce shirts
Labor Utilisation
Daily wage for workers
Labour Cost

0.5
18000
900
112.5
1.875
0.533
396
5
1980
480
960
900
93.75%
2.2
90
30
120
60
8
480
0.25
4
1
2.5
5
0.5
25.51
27.01
65
31200
24309
77.91%
3120
3.47

min/shirt
shirts/month
shirts/day
Shirts/hour
Shirts/min
min/shirt
Batches
Shirts/ batch
Shirts
Minutes
Shirts
Shirts
days
min/batch
min/batch
min/batch

Shirts/batch
Min/ shirt
Min/shirt
min
Min/ shirt
Min/shirt
Min/shirt
min
min
$/day
$/shirt

Exhibit 3
Calculations for Ikes process (Regular Shirts):
Ike's process for regular shirts
Operation
Make Collar
Make Cuffs
Make Sleeves
Make Front
Make Back
Join Shoulder
Attach collar
Attach sleeves
Stitch Down sleeves
Sew Side seam
Attach cuffs
Hem Button
Inspect
Iron
Fold Package

Regular Shirt Number Time required

Labour
of
for producing
Content workers one unit (in min.)
3.9
2
0.65
2.5
1.7
0.66
1.65
1.55
0.65
1.8
1.55
1.7
1.5
1.95
1.75

7
3
1
5
3
1
3
3
1
3
3
3
3
3
3

0.56
0.67
0.65
0.50
0.57
0.66
0.55
0.52
0.65
0.60
0.52
0.57
0.50
0.65
0.58

Ike's process (regular)

Ideal Cycle Time
0.67
Actual production
16000
Number of shirts/day
800
Number of shirts/hour
100
Number of shirts/min
1.67
Actual Cycle time
0.60
Average WIP total
151
Number of shirts in a batch
60
WIP inventory
9060
Time available for production/day
480
Ideal Production capacity
720
Actual Production capacity
800
Capacity Utilisation
111.11%
Overtime/ day
53.328
Manufacturing Lead Time
11.325
Cutting Set-up time
90
Cutting and removing
30
Total cutting time
120
Number of layers
60
Number of patterns
8
No. of shirts/ batch
480
Cutting minutes/ shirt
0.25
No of workers for cutting
4
labor content for cutting
1
All other labor content
25.51
Labor content
26.51
Number of workers
49
Total available time
26133.33
Time taken to produce shirts
21208
Labor Utilisation
81.15%
Regular Daily wage for workers
2352
Overtime wage
7.9992
Overtime daily wage
391.96
Total daily wage
2743.96
Labour Cost
3.43

min/shirt
shirts/month
shirts/day
Shirts/hour
Shirts/min
min/shirt
Batches
Shirts/ batch
Shirts
Minutes
Shirts
Shirts
min/day
days
min/batch
min/batch
min/batch

Shirts/batch
Min/ shirt
Min/shirt
Min/shirt
Min/shirt
min
min
$/day
$/hr
$/day
$/day
$/shirt

Exhibit 4
Calculations for Ikes process (Customized Shirts):
Ike's process for customized shirts
Operation

Labour
Content

Make Collar
Make Cuffs
Make Sleeves
Make Front
Make Back
Join Shoulder
Attach collar
Attach sleeves
Stitch Down sleeves
Sew Side seam
Attach cuffs
Hem Button
Inspect
Iron
Fold Package

3.9
2
0.65
2.5
1.7
0.66
1.65
1.55
0.65
1.8
1.55
1.7
1.5
1.95
1.75

Number Time required

of
for producing
workers one unit (in min.)
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

3.90
2.00
0.65
2.50
1.70
0.66
1.65
1.55
0.65
1.80
1.55
1.70
1.50
1.95
1.75

Ike's process (Customised)

Ideal Cycle Time
3.90
Actual production
2000
Number of shirts/day
100
Number of shirts/hour
12.5
Number of shirts/min
0.21
Actual Cycle time
4.80
Number of shirts in a batch
60
WIP inventory
50
Time available for production/day
480
Ideal Production capacity
123.08
Actual Production capacity
100
Capacity Utilisation
81.25%
Manufacturing Lead Time
0.5
New machine cutting time
2.5
Number of layers
5
New machine labor content
0.5
All other labor content
25.51
Labor content
26.01
Number of workers
16
Total available time
7680
Time taken to produce shirts
2601
Labor Utilisation
33.87%
Regular Daily wage for workers
768
Labour Cost
7.68

min/shirt
shirts/month
shirts/day
Shirts/hour
Shirts/min
min/shirt
Shirts/ batch
Shirts
Minutes
Shirts
Shirts
days
min
Min/ shirt
Min/shirt
Min/shirt
min
min
$/day
$/shirt