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applications. Since it is not possible to have a partial machine or
person, certain figures will always have to be rounded up.
GENERAL COMPANY INFORMATION
Fantastic, Inc. is a paint manufacturing company that produces two
qualities of paint, Super and Stupendous. The company was
established eight years ago and began with only one type of paint.
Sales of the original product have been rather stable in the past 5
years. In 2003, a second, higher quality paint was introduced, and
sales of this product have increased each year due to reasonably
effective sales efforts. The president is currently concerned about the
potential inefficient use of capacity and the effect that this has on
profits.
All raw materials are currently purchased from outside suppliers and
no difficulty is foreseen in obtaining the necessary inventories for
production in the future. All inventories are currently considered to be
at the lowest safe levels possible given the delivery, production, and
sales cycles.
Given the current production capacity, the company will have room for
expansion for the next few years without building new facilities or
expanding the current building. The company will also have the option
of starting a second production shift to support future sales if
necessary; therefore, increased production will be obtainable through
purchasing additional equipment or increasing production hours. At
this time, however, the president is not considering a second shift due
the additional $1.00 per hour shift differential that would be necessary
to pay the hourly second shift workers.
The company had a cash flow problem in 2005 but has always
managed to make all payments on a timely basis. The president wishes
to increase the amount of cash on hand in the future so that the
company will have a greater margin of safety. To date, the company