Five Star Tools

Five Star Tools

Executive Summary Five Star Tools is a family owned company that manufactures diamond-coated chisels and saws used by jewelers. As a result of the growth of the firm, management has identified production constraints in the coating and sharpening process that causes Five Star Tools to miss deadlines. Overview Maxfield Turner, president of Five Star Tools, decides to discuss how to handle the company’s current growing pains with the VP of marketing, Betty Spence. They both express two very different approaches to loosen the production constraints. Spence believes that the company’s reputation will be tarnished and result in a negative impact on profitability if they continue to miss deadlines. Her approach to the situation involves turning down business beyond the scope of the firm’s current production capacity. Turner believes that the best route will be to concentrate on loosening the constraints on the coating and sharpening process while reviewing what impact eliminating less profitable products will have on profitability. Issues Addressed A. What steps can be taken to loosen the constraint in coating and sharpening? Ÿ Ÿ Ÿ Ÿ The cutting and chemical bath department can be scaled back to meet the needs of the coating and sharpening department in order to alleviate the back up Outsource some of the work performed by the coating and sharpening department Develop an inspection station as not to waste time on defective units before they reach the coating and sharpening department Restructure the coating and sharpening process to make it more efficient

B. Consider Model C210 and Model D400 chisels. Which product should be emphasized if the constraint in coating and sharpening cannot be loosened? Selling Price Less Variable Costs: Direct Labor $ 85 Direct Material $150 Variable Overhead $ 15 Contribution Margin Less Allocated Fixed Cost Profit Per Unit Time in Coating & Sharpening to Production Model C210 $500 $180 $180 $ 60 Model D400 $850...