PRODUCTION AND OPERATIONS MANAGEMENT

CLASSWORK

A company produces Strawberry yoghurt in 1L bottles, that are packaged in a box with 4 units inside.
The components for each liter and the unitary cost of each component are in the table 1:

Material Quantity Unitary Cost

Strawberry extract 20 grams $ 5.00 Kg
Milk 0.9 L $ 1.00 L
Sugar 250 grams $ 1.00 Kg
Condensed milk 0.04 L $ 2.00 L
Strawberry ice 0.06 L $ 2.50 L
cream
Bottle 1 Unit $ 0.30 Uni
t
Cover 1 Unit $ 0.15 Uni
t
Label 1 Unit $ 0.05 Uni
t
Box 0.25 Unit $ 0.50 Uni
t
Table 1: Bill of materials (BOM) and unitary cost

Workforce $ 10,000.00 month

Maintenance $ 2,000.00 month

OFC $ 3,500.00 month
Table 2: Fixed costs

Material % Share
Strawberry extract 4.34%
Milk 42.58%
Sugar 9.96%
Condensed milk 3.31%
Strawberry ice 6.33%
cream
Bottle 11.83%
Cover 6.03%
Label 2.07%
Box 5.91%
All FC 7.64%
Table 3: % cost share. (All fixed costs are 7.64%)

The average monthly sales of this product is 20.000 boxes/month, and the total production cost is
$202.900 per month. The fixed monthly costs of the plant are in table 2 and the % share of costs is in
table 3.
Questions:

1. Define the real cost per unit of one yoghurt bottle and the real cost that each component has in
one bottle of product according to the following tables

TOTAL COST: $ 2.54 /unit

Item $/unit %Share

Raw material $ 66.52%
1.69
Packing Material $ 25.84%
0.66
Workforce $ 4.93%
0.12
Maintenance $ 0.99%
0.02
Other Fixed $ 1.72%
Costs 0.04
TOTAL $
2.54 100.00%

2. How much money is this Company wasting per month ($/Month)?

Waste per Month: $18,998.44

3. If the Company detects that can save 60% in waste of milk and boxes, 50% in strawberry extract
and sugar, and 40% in condensed milk, ice cream, cover and label, how much money per month
can this Company save?
Money Saved if waste is reduced: $10,976.86

4. What happens if they reduce workforce in 80% but can’t reduce waste as detected in point 3.
How much money can they save per month?

Money Saved if WF is reduced 80%: $8,001.56

5. Why is better to save money by waste than by workforce?

Rta. Because waste it is directly proportional to demand, if the demand increases waste will
increase as well.

Yogurt
Workshop.xlsx