We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}
The PQ quiz below is deterministic, with one correct answer. You have only ten minutes to take the quiz once you have familiarized yourself with the data provided. This quiz has been given to CEO’s worldwide for over 20 years. Over that time span, less than one percent of CEO’s get the correct answer. Will you?

The Simple Company makes just 2 products: Pens and Quills. The goal of the company is to maximize profitability. The company has 4 resources that are not interchangeable: Abby, Bobby, Christi and David. The work week is 40 hours (meaning each resource is available for 2,400 minutes per week).

Unlike reality, the environment of the Simple Company has perfect information. Everything is fixed, and every piece of data is precisely known. There is no scrap, no set-up, no worker breaks or absenteeism, no downtime; this is just an idyllic company. We have removed all the uncertainties. Our marketing department is the best, and we know the exact weekly demand for each Pen and Quill.

Operating expenses are $6,000 per week. These are all the fixed costs which include labor, benefits, utilities, interest, SG&A expenses, etc. Labor is paid at the rate of $10 per hour for all resources but remember that labor is included in the $6,000 of operating expense. The raw material (RM) costs and processing times are shown in the diagram of the production process of the Simple Company below.

What is the maximum net profit (or minimum net loss) the Simple Company can earn in 1 week with the current demand?

Please email your answer at any time. You will receive back an email with the correct answer, as well as the methodology for arriving at the correct answer for more complicated real-life scenarios.
…to be continued.Here’s to maximizing YOUR profits!
The pens and quills problem was adapted from the Haystack Syndrome.

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