Question & Answer: Mr. K’s is a very popular hair salon. It offers high-quality hairstyling and physical…..

Mr. K’s is a very popular hair salon. It offers high-quality hairstyling and physical relaxation services at a reasonable price, so it always has unlimited demand. The service process includes five activities that are conducted in the sequence described below. (The time required for each activity is shown in parenthesis):

	Activity 1: Welcome a guest and offer homemade herb tea. (14 minutes)
	Activity 2: Wash and condition hair. (10 minutes)
	Activity 3: Neck, shoulder, and back stress release massage. (14 minutes)
	Activity 4: Design the hairstyle and do the hair. (28 minutes)
	Activity 5: Check out the guest. (2 minutes)

Three servers (S1, S2, and S3) offer the services in a worker-paced line. The assignment of tasks to servers is the following: S1 does Activity 1. S2 does activities 2 and 3. S3 does activities 4 and 5.
	Instruction: Do not round your intermediate calculations. Round average labor utilization to 2 decimal places and all direct labor costs to 2 decimal places.
a.	What is the labor content?	minutes per customer

b.	What is the average labor utilization?	percent

c.	At a wage rate of $15 per hour, what is the cost of direct labor per customer?	per customer

d.	Mr. K. considers hiring a new employee to help any one (and only one) of the servers without changing the tasks performed by each server. What would the new direct labor cost be	per customer

e.	Mr. K also contemplates redesigning the assignment of tasks to servers. For this, Mr. K is evaluating the reassignment of Activity 5 from S3 to S1. What would the new direct labor cost be?	per customer

Expert Answer

Answer

a. A labor content is nothing but the total sum of all the process. There are 5 activity and each activity has some duration. Adding all the duration will provide the total labor content

Labor content = Activity 1 + Activity 2 + Activity 3 + Activity 4 + Activity 5

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= 14 + 10 + 14 + 28 + 2

= 68 minutes

The labor content per customer is 68 minutes.

b) The average labor utilization is the key indicator of the effective overall performance or the process.

Server 1 can process (1 / 14) customer per min

Server 2 can process (1 / 10 + 14) = 1 / 24 customer per min

Server 3 can process (1 / 28 + 2) = 1 / 30 customer per min. Hence Server 3 will be bottleneck and the idle time.

Average labor utilization = Total labor content / (Total labor content + idle time)

= 68 / (68 + 30)

= 68 / 98

= 0.6938 = 69.38%

The average labor utilization is 69.38%

c) There are 3 servers, means there are 3 employees in the system

Wages = 3 x 15 = $45

Flow rate = 68 / 30

= 2.26

Direct labor cost = total wages / flow rate

= 45 / 2.26

= $19.91 per customer

The cost of direct labor per customer is $19.91

d) Given that there will be an extra employee, so the customer capacity would increase from 3 to 4

New direct labor cost = (15 x 3) / 4

= $11.25

The new direct cost would be $11.25

e) By reassigning Sever 3 will have the operating time of 28 mins and server 1 will have 16 mins

therefore, flow rate of server 3 would be 68 / 28 = 2.42

Total direct cost = 45 / 2.42

= $18.59

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