Posted: August 28th, 2016
Portable Phones, Inc. manufactures and sells wireless telephones for residential and commercial use. Portable Phones’ plant is organized by product line, with five phone assembly departments in total. Each of these five phone assembly departments is responsible for the complete production of a particular phone line, including manufacturing some parts, purchasing other parts, and assembling the unit. Each of the five phone assembly department manager reports to a product-line manager, who then has to profit responsibility for his/her product. These five product-line managers have authority over pricing, marketing, distribution, and production of their product. Each of the five phone assembly departments is a cost center within its respective product-line profit center.
A key component of each phone is the circuit board(s) containing the integrated circuit chips. Each phone assembly department purchases from outside vendors the basic boards and chips to be attached to its board(s). The board department of the plant receives the boards and chips in kits from each phone assembly department and assembles them into completed boards ready for assembly into the phones. The board department (with a cost structure that is 80 percent fixed and 20 percent variable) uses a single highly automated assembly line of robotic insertion machines to precisely position each chip on the board and soldering machines to solder the chips onto the board. The board department is a common resource for the plant; all five of the phone assembly departments use the board department to assemble some or all of their boards. Since the board department have a single assembly line, it can only assemble boards for one type of phone at a time. The assembly departments have authority to seek the most competitive supplier for all their parts and services, including circuit board assembly.
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