Merton Truck Company TABLE A Machine-hours: Requirements and availability Machine-hours Required per Truck Model 101 Model

102 1.0 2.0 2.0 $ 39,000 $ 2.0 2.0 3.0 38,000

Department Engine assembly Metal stamping Model 101 assembly Model 102 assembly Selling Price TABLE B Standard Product Costs Direct materials Direct Labour Engine assembly Metal stamping Final assembly Overhead Engine assembly Metal stamping Final assembly Total

Total machine-hours Available per Month 4,000 6,000 5,000 4,500

Model 101 $24,000 $1,200 $800 $2,000 $4,000 $2,525 $3,480 $6,200 $12,205 $40,205 $4,850 $3,080 $3,500 $2,400 $600 $1,500

Model 102 $20,000

$4,500

$11,430 $35,930

Q1.(a)

Contribution of Model 101 3000 Contribution of Model 102 5000 Model 101 Model 102 Objective function Max 3000 5000 11000000 Decision Variables 2000 1000 Constraints Hrs req./unit Hrs used Engine assembly 1 2.0 4000 Metal stamping 2 2.0 6000 Model 101 assembly 2 0.0 4000 Model 102 assembly 0 3.0 3000

<= <= <= <=

Max Hrs Available 4000 6000 5000 4500

Q1.(b) Objective function Max Decision Variables Constraints Engine assembly Metal stamping Model 101 assembly Model 102 assembly Q1.(c)

Model 101 Model 102 3000 5000 11002000 1999 1001 Hrs req./unit Hrs used 1 2.0 4001 2 2.0 6000 2 0.0 3998 0 3.0 3003

<= <= <= <=

Max Hrs Available 4001 6000 5000 4500

Model 101 Model 102 Objective function Max 3000 5000 11200000 Decision Variables 1900 1100 Constraints Hrs req./unit Hrs used Engine assembly 1 2.0 4100 Metal stamping 2 2.0 6000 Model 101 assembly 2 0.0 3800 Model 102 assembly 0 3.0 3300 Model 101 Model 102 3000 5000 12000000 1500 1500 Hrs req./unit Hrs used 1 2.0 4500 2 2.0 6000 2 0.0 3000 0 3.0 4500

<= <= <= <=

Max Hrs Available 4100 6000 5000 4500

Q1.(d) Objective function Max Decision Variables Constraints Engine assembly Metal stamping Model 101 assembly Model 102 assembly

<= <= <= <=

Max Hrs Available 4501 6000 5000 4500

Unsed Hrs 0 0 1000 1500

Unsed Hrs 0 0 1002 1497

Unsed Hrs 0 0 1200 1200

Unsed Hrs 1 0 2000 0

Q2. Objective function Max Decision Variables Constraints Engine assembly Metal stamping Model 101 assembly Model 102 assembly

Model 101 Model 102 3000 5000 12000000 1500 1500 Hrs req./unit Hrs used 1 2.0 4500 2 2.0 6000 2 0.0 3000 0 3.0 4500

Max Hrs Available <= <= <= <= 6000 5000 4500

Max machine hrs rented

500.0

Unsed Hrs 0 2000 0

Microsoft Excel 12.0 Answer Report Worksheet: [Book1]Sheet4 Report Created: 06-10-2013 01:59:20

Target Cell (Max) Cell Name $G$4 Objective function Max

Original Value 11000000

Final Value 11000000

Adjustable Cells Cell Name $D$5 Decision Variables Model 101 $E$5 Decision Variables Model 102 $F$5 Decision Variables Model 103

Original Value 2000 1000 0

Final Value 2000 1000 0

Constraints Cell Name $G$7 Engine assembly Hrs used $G$8 Metal stamping Hrs used $G$9 Model 101 assembly Hrs used $G$10 Model 102 assembly Hrs used

Cell Value 4000 6000 4000 3000

Formula $G$7<=$I$7 $G$8<=$I$8 $G$9<=$I$9 $G$10<=$I$10

Status Slack Binding 0 Binding 0 Not Binding 1000 Not Binding 1500

Microsoft Excel 12.0 Sensitivity Report Worksheet: [Book1]Sheet4 Report Created: 06-10-2013 01:59:20

Adjustable Cells Cell $D$5 $E$5 $F$5 Name Decision Variables Model 101 Decision Variables Model 102 Decision Variables Model 103 Final Reduced Objective Allowable Allowable Value Cost Coefficient Increase Decrease 2000 0 3000 2000 499.9999999 1000 0 5000 1000 2000 0 -350 2000 350 1E+30

Constraints Cell $G$7 $G$8 $G$9 $G$10 Name Engine assembly Hrs used Metal stamping Hrs used Model 101 assembly Hrs used Model 102 assembly Hrs used Final Shadow Constraint Allowable Value Price R.H. Side Increase 4000 2000 4000 500 6000 500 6000 500 4000 0 5000 1E+30 3000 0 4500 1E+30 Allowable Decrease 500 1000 1000 1500

Microsoft Excel 12.0 Limits Report Worksheet: [Book1]Limits Report 1 Report Created: 06-10-2013 01:59:20

Target Cell Name $G$4 Objective function Max

Value 11000000

Adjustable Cell Name $D$5 Decision Variables Model 101 $E$5 Decision Variables Model 102 $F$5 Decision Variables Model 103

Value 2000 1000 0

Lower Target Limit Result 0 5000000 0 6000000 0 11000000

Upper Target Limit Result 2000.000005 11000000.02 1000.000003 11000000.01 0 11000000

Q3.(a) Objective function Max Decision Variables Constraints Engine assembly Metal stamping Model 101 assembly Model 102 assembly

Model 101 Model 102 Model 103 3000 5000 2000 11000000 2000 1000 0 Hrs req./unit Hrs used 1 2.0 0.8 4000 2 2.0 1.5 6000 2 0.0 1.0 4000 0 3.0 0.0 3000

<= <= <= <=

Max Hrs Available 4000 6000 5000 4500

Hence, they should not preoduce 103 Trucks Q3.(b) The contribution of each Model 103 truck has to be increased by $350(See worksheet 3b) before it becomes Model 101 Model 102 Model 103 3000 5000 2350 11000000 2000 1000 0 Hrs req./unit Hrs used 1 2.0 0.8 4000 2 2.0 1.5 6000 2 0.0 1.0 4000 0 3.0 0.0 3000

Objective function Max Decision Variables Constraints Engine assembly Metal stamping Model 101 assembly Model 102 assembly

<= <= <= <=

Max Hrs Available 4000 6000 5000 4500

Objective function Max Decision Variables Constraints Engine assembly Metal stamping Model 101 assembly Model 102 assembly

Model 101 Model 102 Model 103 3000 5000 2351 11002840 12 858 2840 Hrs req./unit Hrs used 1 2.0 0.8 4000 2 2.0 1.5 6000 2 0.0 1.0 2864 0 3.0 0.0 2574

<= <= <= <=

Max Hrs Available 4000 6000 5000 4500

Unsed Hrs 0 0 1000 1500

t 3b) before it becomes worthwhile to produce any unit

Unsed Hrs 0 0 1000 1500

Unsed Hrs 0 0 2136 1926

Q4. Objective function Max Decision Variables Constraints Engine assembly Metal stamping Model 101 assembly Model 102 assembly

Model 101 Model 102 3000 5000 12000000 1500 1500 Hrs req./unit Hrs used 1 2.0 4500 2 2.0 6000 2 0.0 3000 0 3.0 4500

Net Profit

1750000

<= <= <= <=

Max Hrs Available 6000 6000 5000 4500

Cost of overtime in engine assembly

1800

Overtime is not advisable Since operating overtime reduces the profits(earlier net profit was 2,400,000 now it has reduced to 1,750,000

Alternative Method Objective function Max Decision Variables Constraints Engine assembly Metal stamping Model 101 assembly Model 102 assembly Model 101 Model 102 3000 5000 1500 1250 Hrs req./unit 1 2.0 2 2.0 2 0.0 0 3.0 Overtime 2400 3800 11700000 0 250 Hrs used 4000 2 2.0 6000 2 0.0 3000 0 3.0 4500 1 2.0 500

Unsed Hrs 1500 0 2000 0

Net increase in Contribution Monthly overtime cost Hence not worth to go for overtime

700000 750000

now it has reduced to 1,750,000)

Net Profit

2350000

<= <= <= <=

Max Hrs Available 4000 6000 5000 4500 2000

Unsed Hrs 0 0 2000 0 1500

Q5. Objective function Max Decision Variables Constraints Engine assembly Metal stamping Model 101 assembly Model 102 assembly Additional constraint

Model 101 Model 102 3000 5000 10500000 2250 750 Hrs req./unit Hrs used 1 2.0 3750 2 2.0 6000 2 0.0 4500 0 3.0 2250 1 3.0 0

<= <= <= <=

Max Hrs Available 4000 6000 5000 4500

Unsed Hrs 250 0 500 2250

Objective function Max Decision Variables Constraints Engine assembly Metal stamping Model 101 assembly Model 102 assembly Additional constraint

Model 101 Model 102 3000 5000 11000000 2000 1000 Hrs req./unit Hrs used 1 2.0 4000 2 2.0 6000 2 0.0 4000 0 3.0 3000 1 -2.0 0 NO CHANGE

<= <= <= <=

Max Hrs Available 4000 6000 5000 4500

Unsed Hrs 0 0 1000 1500