A carton manufacturer produces two sizes of carton for a fortune 100 logistics company. The logistics company has agreed to buy the cartons for next 12 months. The carton manufacturer now has tasked their operations manager to identify the number of cartons to produce for each size to achieve maximum revenue. When sold to the logistics company, carton A5 sells for 6 dollars a piece and carton C5 sells for 8 dollars a piece. The carton manufacturer has a labor hours capacity of 8,300 hours and budget for raw material limited to $ 185,580. Carton A5 utilizes 0.09 hours of labor and $2 of material cost per piece whereas, carton C5 utilizes 0.12 hours of labor and $2.75 of material cost per piece. Formulate a LP model and solve in excel solver to calculate the optimal quantities of each type leading to maximizing the revenue and satisfying all constraints.

A carton manufacturer produces two sizes of carton for a fortune 100 logistics company. The logistics company has agreed to buy the cartons for next 12 months. The carton manufacturer now has tasked their operations manager to identify the number of cartons to produce for each size to achieve maximum revenue. When sold to the logistics company, carton A5 sells for 6 dollars a piece and carton C5 sells for 8 dollars a piece. The carton manufacturer has a labor hours capacity of 8,300 hours and budget for raw material limited to $ 185,580. Carton A5 utilizes 0.09 hours of labor and $2 of material cost per piece whereas, carton C5 utilizes 0.12 hours of labor and $2.75 of material cost per piece. Formulate a LP model and solve in excel solver to calculate the optimal quantities of each type leading to maximizing the revenue and satisfying all constraints.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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Best Trim, a manufacturer of lawn mowers, predicts that it will purchase 204,000 spark plugs next year. Best Trim estimates that 17,000 spark plugs will be required each month. A supplier quotes a price of $9 per spark plug. The supplier also offers a special discount option: If all 204,000 spark plugs are purchased at the start of the year, a discount of 2% off the $9 price will be given. Best Trim can invest its cash at 10% per year. It costs Best Trim $260 to place each purchase order. Q. What is the opportunity cost of interest forgone from purchasing all 204,000 units at the start of the year instead of in 12 monthly purchases of 17,000 units per order?