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The Auto Company of America (ACA) produces four types of cars: subcompact, compact, intermediate, and luxury. ACA also produces trucks and vans. Vendor capacities limit total production capacity to at most 1,200,000 vehicles per year. Subcompacts and compacts are built together in a facility with a total annual capacity of 620,000 cars. Intermediate and luxury cars are produced in another facility with capacity of 400,000; and the truck/van facility has a capacity of 275,000. ACA's marketing strategy requires that subcompacts and compacts must constitute at least half of the product mix for the four car types. Profit margins, market potential, and fuel efficiencies are summarized below. Type Subcompact Compact Intermediate Luxury Truck Van Profit margin ($/vehicle) 150 225 250 500 400 200 Potential sales (in 000s) 600 400 300 225 325 100 Fuel efficiency (MPG) 40 34 15 12 20 25 The Corporate Average Fuel Efficiency (CAFE) standards require an average fleet fuel efficiency of at least 27 MPG. ACA would like to use a linear programming model to understand the implications of government and corporate policies on its production plans. Using excel and the solver tool: 1) What is the optimal annual profit for ACA? 2) How much would annual profit drop if the fuel efficiency requirement were raised to 28 MPG?

The Auto Company of America (ACA) produces four types of cars: subcompact, compact, intermediate, and luxury. ACA also produces trucks and vans. Vendor capacities limit total production capacity to at most 1,200,000 vehicles per year. Subcompacts and compacts are built together in a facility with a total annual capacity of 620,000 cars. Intermediate and luxury cars are produced in another facility with capacity of 400,000; and the truck/van facility has a capacity of 275,000. ACA's marketing strategy requires that subcompacts and compacts must constitute at least half of the product mix for the four car types. Profit margins, market potential, and fuel efficiencies are summarized below. Type Subcompact Compact Intermediate Luxury Truck Van Profit margin ($/vehicle) 150 225 250 500 400 200 Potential sales (in 000s) 600 400 300 225 325 100 Fuel efficiency (MPG) 40 34 15 12 20 25 The Corporate Average Fuel Efficiency (CAFE) standards require an average fleet fuel efficiency of at least 27 MPG. ACA would like to use a linear programming model to understand the implications of government and corporate policies on its production plans. Using excel and the solver tool: 1) What is the optimal annual profit for ACA? 2) How much would annual profit drop if the fuel efficiency requirement were raised to 28 MPG?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter11: Simulation Models
Section: Chapter Questions
Problem 69P: The Tinkan Company produces one-pound cans for the Canadian salmon industry. Each year the salmon...
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The Auto Company of America (ACA) produces four types of cars: subcompact, compact, intermediate, and luxury. ACA also produces trucks and vans. Vendor capacities limit total production capacity to at most 1,200,000 vehicles per year. Subcompacts and compacts are built together in a facility with a total annual capacity of 620,000 cars. Intermediate and luxury cars are produced in another facility with capacity of 400,000; and the truck/van facility has a capacity of 275,000. ACA's marketing strategy requires that subcompacts and compacts must constitute at least half of the product mix for the four car types. Profit margins, market potential, and fuel efficiencies are summarized below. Type Subcompact Compact Intermediate Luxury Truck Van Profit margin ($/vehicle) 150 225 250 500 400 200 Potential sales (in 000s) 600 400 300 225 325 100 Fuel efficiency (MPG) 40 34 15 12 20 25 The Corporate Average Fuel Efficiency (CAFE) standards require an average fleet fuel efficiency of at least 27 MPG. ACA would like to use a linear programming model to understand the implications of government and corporate policies on its production plans. Using excel and the solver tool: 1) What is the optimal annual profit for ACA? 2) How much would annual profit drop if the fuel efficiency requirement were raised to 28 MPG?
Transcribed Image Text:The Auto Company of America (ACA) produces four types of cars: subcompact, compact, intermediate, and luxury. ACA also produces trucks and vans. Vendor capacities limit total production capacity to at most 1,200,000 vehicles per year. Subcompacts and compacts are built together in a facility with a total annual capacity of 620,000 cars. Intermediate and luxury cars are produced in another facility with capacity of 400,000; and the truck/van facility has a capacity of 275,000. ACA's marketing strategy requires that subcompacts and compacts must constitute at least half of the product mix for the four car types. Profit margins, market potential, and fuel efficiencies are summarized below. Type Subcompact Compact Intermediate Luxury Truck Van Profit margin ($/vehicle) 150 225 250 500 400 200 Potential sales (in 000s) 600 400 300 225 325 100 Fuel efficiency (MPG) 40 34 15 12 20 25 The Corporate Average Fuel Efficiency (CAFE) standards require an average fleet fuel efficiency of at least 27 MPG. ACA would like to use a linear programming model to understand the implications of government and corporate policies on its production plans. Using excel and the solver tool: 1) What is the optimal annual profit for ACA? 2) How much would annual profit drop if the fuel efficiency requirement were raised to 28 MPG?
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