Operations Management: An Integrated Approach, 5th Edition

CASE: JPC, Inc.: Kitchen Countertops Manufacturer

JPC, Inc. is a major producer of solid-surface kitchen countertops. The countertops are made from a durable nonporous acrylic polymer and are available in a wide variety of colors. The tops resist stains, scratches, fading from sunlight, and heat. They also do not promote the growth of mildew or bacteria, thus providing an easy-care, sanitary countertop. Its products are distributed throughout North America and until recently have experienced growing demand. The products are used primarily in new house construction. The company currently operates three different manufacturing plants.

During the recent housing slowdown, demand for the countertops has dropped significantly (from 2,300,000 tops last year to an expected 1,700,000 tops), and JPC is considering closing one of its three plants. The annual regular-time production capacity at Plant 1 is 960,000 tops; Plant 2 can produce 480,000 tops per year; and Plant 3 can produce 720,000 tops per year. Each plant is allowed to use up to an additional 20 percent overtime for top production. This means that, theoretically, JPC could produce as many as 2,592,000 tops with its current facilities.

If JPC closes down a plant, the weekly costs associated with the closed, nonoperating plant will decrease. Closing Plant 1 would reduce annual fixed costs to $312,000. If Plant 1 remains operational, the fixed costs are $728,000. If Plant 2 is closed, annual fixed costs drop to $260,000 rather than ...