Case Study:

Production Strategy

Better Fitness Inc.

Jed D. Dillo Gilda C. Monsole, CPA, MBA

MBA1- Student Subject Professor
 Better Fitness Inc., Case Study

Case Problem 2 - PRODUCTION STRATEGY Better Fitness, Inc

Better Fitness, Inc. (BFI), manufactures exercise equipment at its plant in Freeport, Long
Island. It recently designed two universal weight machines for the home exercise market. Both
machines use BFI-patented technology that provides the user with an extremely wide range of
motion capability for each type of exercise performed. Until now, such capabilities have been
available only on expensive weight machines used primarily by physical therapist.

At a recent trade show, demonstration of the machines resulted in significant dealer interest. In
fact, the number of orders that BFI received at the trade show far exceeded its manufacturing
capabilities for the number of orders that BFI received at the trade show far exceeded its
manufacturing capabilities for the current production period. As a result, management decide
to begin production of the two machines. The two machines, which BFI has named the
BodyPlus 100 and the BodyPlus 200, require different amounts of resources to produce.
 Better Fitness Inc., Case Study

Case Problem 2 - PRODUCTION STRATEGY Better Fitness, Inc

The BodyPlus 100 consists of a frame unit, a press station, and a pec-dec station. Each frame
produced uses 4 hours of machining and welding time and 2 hours of painting and finishing
time. Each press station requires 2 hours of machining and welding time and 1 hour of
painting and finishing time, and each pec-dec station uses 2 hours of machining and welding
time and 2 hours of painting and finishing time. In addition, 2 hours are spent assembling,
testing, and packaging each BodyPlus 100. The raw material costs are $450 for each frame,
$300 for each press station and $250 for each pec-dec station; packaging costs are estimated
to be $50 per unit.

The BodyPlus 200 consists of a frame unit, a press station, a pec-dec station, and a leg-press
station. Each frame produced uses 5 hours of machining and welding time and 4 hours of
painting and finishing time. Each press station requires 3 hours machining and welding time
and 2 hours of painting and finishing time, and each leg-press station requires 2 hours of
machining and welding time and 2 hours of painting and finishing time. In addition, 2 hours
are spent assembling, testing, and packaging each BodyPlus 200. The raw material costs are
$650 for each frame, $400 for each press station, $250 for each pec-dec station, and $200 for
each leg-press station; packaging costs are estimated to be $75 per unit.
 Better Fitness Inc., Case Study

Case Problem 2 - PRODUCTION STRATEGY Better Fitness, Inc

For the next production period, management estimates that 600 hours of machining
And welding time, 450 hours of painting and finishing time, and 140 hours of assembly,
testing, and packaging time will be available. Current labor costs are $20 per hour for
machining and welding time, $15 per hour for painting and finishing time, and $12 per hour
for assembly, testing and packaging time. The market in which the two machines must
compete suggests a retail price of $2400 for the BodyPlus 100 and $3500 for the BodyPlus
200, although some flexibility may be available to BFI because of the unique capabilities of
the new machines. Authorized BFI dealers can purchase machines for 70% of the suggested
retail prices.

BFI’s president believes that the unique capabilities of the BodyPlus 200 can help position
BFI as one of the leaders in high-end exercise equipment. Consequently, he has stated that the
number of units of the BodyPlus 200 produced must be least 25% of the total production.
 Better Fitness Inc., Case Study

Case Problem 2 - PRODUCTION STRATEGY Better Fitness, Inc

Managerial Report

Analyze the production problem at Better Fitness Inc., and prepare a report for BFI’s president
presenting your findings and recommendations. Include (but do not limit your discussion to) a
consideration of the following items:

1. The recommended number of BodyPlus 100 and BodyPlus 200 machines to produces.
2. The effect on profits of the requirement that the number of units of the BodyPlus 200
produces must be at least 25% of the total production.
3. Where efforts should be expended in order to increase profits.

Include a copy of your linear programming model and graphical solution in an appendix to
your report.
 Better Fitness Inc., Case Study

BFI wants to manufacture its two

machines:

BodyPlus 100
BodyPlus 200
 Better Fitness Inc., Case Study

BodyPlus 100 consists of : BodyPlus 200 consists of :

a) Frame Unit a) Frame Unit

b) Press Station b) Press Station
c) Pec -Dec Station c) Pec -Dec Station
d) Leg Press station
 Better Fitness Inc., Case Study

BodyPlus 100 And BodyPlus 200

There are various activities involved in

per unit manufacturing of BodyPlus100 and
BodyPlus200 :

Machining and welding

Painting and finishing
Assembling, packaging and testing
These activities take different amount of time.
 Better Fitness Inc., Case Study

BodyPlus 100
Machine and Painting and Assembling, Raw Material Packaging Cost
Welding Time Finishing Time Testing and Cost ($) ($)
(hrs.) (hrs.) Packaging
Time (hrs.)

Frame Unit 4 2 450

Press Station 2 1 300
2 50
Pec-Dec
Station 2 2 250

Total 8 5 2 1000
 Better Fitness Inc., Case Study

BodyPlus 200
Machine and Painting and Assembling, Raw Material Packaging Cost
Welding Finishing Time Testing and Cost ($) ($)
Time (hrs.) (hrs.) Packaging
Time (hrs.)

Frame Unit 5 4 650

Press Station 3 2 2 400
75
Pec-Dec Station 2 2 250
Leg- Press Station 2 2 200

Total 12 10 2 1500
 Better Fitness Inc., Case Study

Machine and Painting and Assembling, Testing

Welding Time Finishing Time and Packaging Time

Labor Cost $ 20 $ 15 $ 12

For the next production period management estimates the hours and labour
cost:
Total Time (hrs.) Cost per hour ($)
Machine and Welding
Time 600 20

Painting and Finishing

Time 450 15

Assembling, Testing and

Packaging Time 150 12
 Better Fitness Inc., Case Study

Calculating Manufacturing Cost

Retail Price of BodyPlus 100 = $2400
Retail Price of BodyPlus 200 = $3500
Labour cost for BodyPlus 100= (20x8)+(15x5)+(12x2)= $259
Labour cost BodyPlus 200 = (20x12)+(15x10)+(12x2)= $414
Raw material cost for BodyPlus 100 = $1000 +$50 = $1050
(with $50 as assembling, packaging and testing cost.)
Raw material cost for BodyPlus 200 = $1500 + $75 = $1575
(with $75 as assembling, packaging and testing cost.)
 Better Fitness Inc., Case Study

Calculating Retail Cost

Authorized dealers can purchase at 70% of the suggested price :

BodyPlus 100‘s price =0.70 x 2400 = $1680

BodyPlus 200’s price = 0.70 x 3500 = $2450

This is the Price at which sold to Dealers:

President stated that the number of units of the BodyPlus 200
produced must be at least 25 percent of the total production.
 Better Fitness Inc., Case Study

Calculating Profit BP 100: Calculating Profit BP 200:

Total Cost= Raw Materials + Labour Cost Total Cost= Raw Materials + Labour Cost
= 1050+ 259= $ 1309 = 1575+ 414= $ 1989
Price Sold = $ 1680 Price Sold = $ 2450
Profit = 1680- 1309= $ 371 Profit = 2450- 1989= $461
 Better Fitness Inc., Case Study
A)Decision Variable involved are :

X1 = Number of units of BodyPlus 100 to be produced.

X2 = Number of units of BodyPlus 200 to be produced.

B)LPP Equation (Profit Maximization Equation) :

Max Z = 371X1 +461X2

C)Constraints :

1) Machine and Welding Hours :

8X1 + 12X2<= 600
2) Painting and Finishing Hours :
5X1 + 10X2 <= 450
3) Assembly and Packaging Hours :
2X1 + 2X2 <= 140
4) X2 >= 0.25(X1 +X2)
5) Non Negative Constraints :
X1 >=0 , X2 >=0
 Better Fitness Inc., Case Study

X2

90
80
70
Body Plus 200

60
50
40
Optimal Solution
30
(50, 50/3 0r 16.67)
20
10 Feasible Region

0 10 20 30 40 50 60 70 80 90 100 X1
Body Plus 100
Machine and Welding 8X1 + 12X2<= 600
Painting and Finishing 5X1 + 10X2 <= 450
Assembly and Packing 2X1 + 2X2 <= 140
X2 >= 0.25 (X1+X2)
Optimal Solution
 Better Fitness Inc., Case Study
Constraints : Constraints :

1) Machine and Welding Hours : 4) X2 = 0.25(X1 +X2)

8X1 + 12X2= 600
X1=0; X2= 600/12; X2= 50
X1=50*12/8; X1= 75
5) Non Negative Constraints :
2) Painting and Finishing Hours : X1 >=0 , X2 >=0
5X1 + 10X2 <= 450
X1=0; X2= 450/10; X2= 45
X1=45*10/5; X1=90

3) Assembly and Packaging Hours :

2X1 + 2X2 <= 140
X1=0; X2= 140/2; X2= 70
X1=70*2/2; X1= 70
 Better Fitness Inc., Case Study
1. What is the recommended number of BodyPlus 100 an BodyPlus 200 machines to produce?

Max Z = 371X1 +461X2

X2 Optimal Solution:
X1= 50 and X2= 50/3 or 16.67
90
80 Max Z = 371(50) +461(16.67)
70 Max Z= $26, 234.87
60
Body Plus 200

50
40
Boundary Points:
30
- 0, 0
20 - 0, 45
10 Feasible Region - 30, 30
- 50, 16.67
0 10 20 30 40 50 60 70 80 90 100 X1
Body Plus 100
 Better Fitness Inc., Case Study
2. How does the requirement that the number of units of the BodyPlus 200 produced be at least
25% of the total production affects profits?

Case without constraint of producing at least 25% of X2

BP200 out of the total production 100
90
80
Using the following 4 constraints we can plot the
70
required 60
region to check the optimal solution for case 2.

Body Plus 200

50
40
8X1 + 12X2<= 600 30
Optimal Solution
5X1 + 10X2 <= 450 20
(60, 10)
2X1 + 2X2 <= 140 10 Feasible Region
X1 >=0 , X2 >=0
0 10 20 30 40 50 60 70 80 90 100 X1
Optimal solution X1 = 60 Body Plus 100
X2 = 10 Machine and Welding
Painting and Finishing
Profit = $ 26, 870.00 Assembly and Packing
Optimal Solution
 Better Fitness Inc., Case Study

X2
100
90 Max Z = 371X1 +461X2
80
Optimal Solution:
X1= 60 and X2= 10
70
60
Max Z = 371(60) +461(10)
Body Plus 200

50 Max Z= $26, 870

40
30
20
10 Feasible Region Boundary Points:
- 0, 0
- 0, 45
0 10 20 30 40 50 60 70 80 90 100 X1 - 30, 30
Body Plus 100 - 60, 10
- 70, 0
 Better Fitness Inc., Case Study
Effect of producing BP100 and BP200 without the
constraint of number of BP200 to be at least 25% of the
TOTAL production

Profit margin increases by $26, 870 - $26, 233.487

= $636.513
 Better Fitness Inc., Case Study
3. Where should efforts be expended in order to increase profits?

• Arriving at the optimal solution considering constraint of the producing

at least 25% BP 200 of the total production, we can see that machine and
welding is fully utilized.
Department Capacity Usage Slack
1) Machine and Welding Hours : Machine and Welding 600 600 0
8(50) + 12(16.67)= 600 Hours
Painting and Finishing 450 416.70 33. 30 hours
2) Painting and Finishing Hours : Hours
5(50)+ 10(16.67) <= 450 Assembly and Packaging 140 133.34 6. 66 hours
3) Assembly and Packaging Hours : Hours
2( 50) + 2(16.67) <= 140

• While there is a slack in the painting and finishing hours and assembly
and packaging hours. Thus by increasing the Machine and Welding
Hours, we can successfully increase profits by utilizing the slack in the
painting and assembling time.
Thank you!