Individual Case Study 7_2 Five Star Tools

Jun 28th, 2015
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Florida Institute of Technology-Melbourne
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Profitability for a company when dealing with constraints. Discusses the constraints the company is dealing with, the effects they have on the company, how these constraints affect profits, and suggestions on how to best handle them.

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Case 7 -2 Five Star ToolsIndividual Case StudyManagerial AccountingFIT BUS 5431October 5, 2014Executive SummaryThe problem Five Star Tools is faced with is dealing with a constraint on their coating and sharpening process which has caused a bottleneck in their production line. This constraint is due to the fact that the company is at capacity in the coating and sharpening process. The process itself requires highly skilled workers as well as expensive equipment. This constraint has caused the company to miss deadlines on orders from important customers. By loosening the constraint, the company would be able to increase profitability. If the constraint were not able to be loosened, the company should focus on the most profitable product, which in this case is the Model C210 chisel.Overview of SituationFive Star Tools, a family-owned manufacturer of diamond-coated cutting tools used by jewelers, is at a critical point in their business. The options that Maxfield Turner, president of the company is discussing with Betty Spence, vice president of marketing, include: concentrating on the products that are most profitable while dropping some of the less profitable ones and

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