Question

GV is a small accounting firm supporting wealthy individuals in their preparation of annual income tax statements. Every December, GV sends out a short survey to their customers, asking for the information required for preparing the tax statements. Based on 50 years of experience, GV categorizes their cases into the following two groups:
i. Group 1 (new customers): 20% of cases
ii. Group 2 (repeat customers): 80% of cases
This year, there are 50 income tax statements arriving each week. In order to prepare the income tax statement, GV has three resources. The activities are carried out by the following three persons:
i. An administrative support person that processes every tax statement.
ii. Senior accountant (who is also the owner): who processes only tax statements for new customers
iii. Junior accountant: who only processes tax statements for repeat customers.
Processing times for both groups and all resources are shown in the table below. Assume that everyone works 40 hours per week.
Group Administrator [min/unit] Handling by senior accountant
[min/unit] Handling by junior accountant
[min/unit]
1 20 40 n/a
2 20 n/a 15
Required:
a. Which of the three persons is the bottleneck?
O Administrator
O Senior accountant
O Junior accountant
b. For a mix of 20:80 between new and old cases, what is the flow rate for new customers?
c. For a mix of 20:80 between new and old cases, what is the flow rate for repeat customers?
d. For a mix of 20:80 between new and old cases, what is the capacity for new customers?
e. For a mix of 20:80 between new and old cases, what is the capacity for repeat customers?

Answer 1

Answer:

a. To find bottleneck resource, we need to determine the utilization of each resource

Processing capacity of Administrator = Available time per week / Processing time = 40*60/20 = 120 cases per week

There are 50 cases per week. So utilization of Administrator = 50/120 = 41.7%

Processing capacity of Senior accountant = 40*60/40 = 60 cases per week.

New cases are 20% of 50 cases per week Therefore utilization of Senior accountant = 20%*50/60 = 16.7%

Processing capacity of Junior accountant = 40*60/15 = 160 cases per week.

Repeat cases are 80% of 50 cases per week Therefore utilization of Junior accountant = 80%*50/160 = 25%

Utilization of Administrator is maximum. Therefore it is the bottleneck resource for 20:80 mix of New and Repeat cases.

b. Flow rate of New cases per week = 50*20% = 10 cases per week

c. Flow rate of Repeat cases per week = 50*80% = 40 cases per week

d. In (a) we have seen that for 20:80 mix between new and repeat cases, Administrator is the bottleneck resource with a capacity of 120 cases per week. Therefore capacity for new cases = 120*20% = 24 per week

e. Capacity for Repeat customers = 120*80% = 96 per week