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7. Component Manufacturing. Vollmer Manufacturing makes three components for sale to refrigeration companies. The components are processed on two machines: a shaper and a grinder. The times (in minutes) required on each machine are as follows: Component 1 2 3 Shaper Component 6 4 4 Machine Grinder 4 Material Cost 5 The shaper is available for 120 hours, and the grinder for 110 hours. No more than 200 units of component 3 can be sold, but up to 1,000 units of each of the other components can be sold. In fact, the company already has orders for 600 units of component 1 that must be satisfied. The per unit selling price and per unit variable cost for each of the three components are as follows: Selling Price 2 Labor Cost

7. Component Manufacturing. Vollmer Manufacturing makes three components for sale to refrigeration companies. The components are processed on two machines: a shaper and a grinder. The times (in minutes) required on each machine are as follows: Component 1 2 3 Shaper Component 6 4 4 Machine Grinder 4 Material Cost 5 The shaper is available for 120 hours, and the grinder for 110 hours. No more than 200 units of component 3 can be sold, but up to 1,000 units of each of the other components can be sold. In fact, the company already has orders for 600 units of component 1 that must be satisfied. The per unit selling price and per unit variable cost for each of the three components are as follows: Selling Price 2 Labor Cost

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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7. Component Manufacturing. Vollmer Manufacturing makes three components for sale to refrigeration companies. The components are processed on two machines: a shaper and a grinder. The times (in minutes) required on each machine are as follows: Component 1 2 3 Shaper Component 6 4 4 Machine Grinder 4 5 2 The shaper is available for 120 hours, and the grinder for 110 hours. No more than 200 units of component 3 can be sold, but up to 1,000 units of each of the other components can be sold. In fact, the company already has orders for 600 units of component 1 that must be satisfied. The selling price and per unit variable cost for each of the three components are as follows: per unit Selling Price Material Cost Labor Cost
Transcribed Image Text:7. Component Manufacturing. Vollmer Manufacturing makes three components for sale to refrigeration companies. The components are processed on two machines: a shaper and a grinder. The times (in minutes) required on each machine are as follows: Component 1 2 3 Shaper Component 6 4 4 Machine Grinder 4 5 2 The shaper is available for 120 hours, and the grinder for 110 hours. No more than 200 units of component 3 can be sold, but up to 1,000 units of each of the other components can be sold. In fact, the company already has orders for 600 units of component 1 that must be satisfied. The selling price and per unit variable cost for each of the three components are as follows: per unit Selling Price Material Cost Labor Cost
Component 1 2 3 Selling Price $25 $18 $27 Material Cost $12 $8 $13 Labor Cost $5 $4 $5 2 < a. For each component, calculate the profit margin (profit margin = selling price - material cost - labor cost). Formulate and solve for the recommended production quantities that will maximize contribution to profit. b. What are the objective coefficient ranges for the three components? Interpret these ranges for company management. c. What are the right-hand-side ranges? Interpret these ranges for company management. d. If more time could be made available on the grinder, how much would it be worth? e. If more units of component 3 can be sold by reducing the sales price by $4, should the company reduce the price? 1
Transcribed Image Text:Component 1 2 3 Selling Price $25 $18 $27 Material Cost $12 $8 $13 Labor Cost $5 $4 $5 2 < a. For each component, calculate the profit margin (profit margin = selling price - material cost - labor cost). Formulate and solve for the recommended production quantities that will maximize contribution to profit. b. What are the objective coefficient ranges for the three components? Interpret these ranges for company management. c. What are the right-hand-side ranges? Interpret these ranges for company management. d. If more time could be made available on the grinder, how much would it be worth? e. If more units of component 3 can be sold by reducing the sales price by $4, should the company reduce the price? 1
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