(a) Formulate this problem in terms of determining the sales-maximising combination of the two products on a weekly basis. (b) Solve the problem graphically. (c) Confirm the solution using simultaneous equations.
(a) Formulate this problem in terms of determining the sales-maximising combination of the two products on a weekly basis. (b) Solve the problem graphically. (c) Confirm the solution using simultaneous equations.
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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Transcribed Image Text:Question 1:
A manufacturer is trying to determine the combination of two products, A and B, that should be
produced. Each product passes through a three-stage production process: Stages I, II and III.
For product A: Stage I takes 3 hours of labour, Stage II takes 4 hours and Stage III takes 1 hour.
For product B: Stage I takes 4 hours, Stage II takes 2 hours and Stage III takes 3 hours.
Product A sells for £38 each unit and B for £40 each unit.
At present 11 people are employed on Stage 1, 12 on Stage II and 10 on Stage III, with all employees
working 40 hours each week.
(a) Formulate this problem in terms of determining the sales-maximising combination of the two
products on a weekly basis.
(b) Solve the problem graphically.
(c) Confirm the solution using simultaneous equations.
(d) Identify the binding and non-binding constraints.
(e) Undertake sensitivity analysis on each of the binding constraints and evaluate the
management information that this generates.
(f) If you know that the Labour hours currently cost £4.50 per hour, determine the profit-
maximising combination of the two products. (Profit = sales - cost).
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