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Operations Management
The Fly-Right Airplane Company builds small jet airplanes to sell to corporations for use by their executives. To meet the needs of these executives, the company's customers sometimes order a custom design of the airplanes being purchased. When this occurs, a substantial start-up cost is incurred to initiate the production of these airplanes. Fly-Right has recently received purchase requests from three customers with short deadlines. However, because the company's production facilities already are almost completely tied up filling previous orders, it will not be able to accept all three orders. Therefore, a decision now needs to be made on the number of airplanes the company will agree to produce (if any) for each of the three customers. The relevant data are given in the next table. The first row gives the start-up cost required to initiate the production of the airplanes for each customer. Once production is under way, the marginal net revenue (which is the purchase price minus the marginal production cost) from each airplane produced is shown in the second row. The third row gives the percentage of the available production capacity that would be used for each airplane produced. The last row indicates the maximum number of airplanes requested by each customer (but less will be accepted).

The Fly-Right Airplane Company builds small jet airplanes to sell to corporations for use by their executives. To meet the needs of these executives, the company's customers sometimes order a custom design of the airplanes being purchased. When this occurs, a substantial start-up cost is incurred to initiate the production of these airplanes. Fly-Right has recently received purchase requests from three customers with short deadlines. However, because the company's production facilities already are almost completely tied up filling previous orders, it will not be able to accept all three orders. Therefore, a decision now needs to be made on the number of airplanes the company will agree to produce (if any) for each of the three customers. The relevant data are given in the next table. The first row gives the start-up cost required to initiate the production of the airplanes for each customer. Once production is under way, the marginal net revenue (which is the purchase price minus the marginal production cost) from each airplane produced is shown in the second row. The third row gives the percentage of the available production capacity that would be used for each airplane produced. The last row indicates the maximum number of airplanes requested by each customer (but less will be accepted).

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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**The Fly-Right Airplane Company Airplane Production Model** The Fly-Right Airplane Company specializes in building small jet airplanes for corporations. These jets are tailored to the specific needs of corporate executives. The company's customers may request custom designs, which leads to substantial start-up costs and impacts production. Recently, Fly-Right received several purchase requests while their production capacity was nearly fully utilized. Therefore, a decision is required on the number of airplanes to produce for three different customers. Below is a table representing key data for each customer: - **Customer Information Table:** | | Customer 1 | Customer 2 | Customer 3 | |--------------------|------------|------------|------------| | Start-up cost ($million) | 3 | 2 | 0.8 | | Marginal net revenue ($million) | 2 | 4 | 0.8 | | Capacity used per plane (%)| 20 | 40 | 20 | | Maximum order (planes) | 3 | 2 | 5 | - **Start-up Cost:** Initial cost to begin production for each order. - **Marginal Net Revenue:** Profit per airplane produced after subtracting production costs. - **Capacity Used per Plane:** Percentage of production capacity needed per plane. - **Maximum Order:** The highest number of planes requested by each customer. - **Spreadsheet Model Requirement:** 1. **Determine Production Quantity:** - Decide the number of airplanes to produce for each customer to maximize total profit. 2. **Data Entry:** - Enter "1" if a start-up cost is incurred, otherwise enter "0." - Number of planes produced for each customer. - **Input Table:** | | Customer 1 | Customer 2 | Customer 3 | |--------------------|------------|------------|------------| | Start-up? (Enter 1 if "Yes", 0 if "No") | | | | | Planes to produce | | | | - **Determine Total Profit:** - Calculate and round the total profit to one decimal place. This model aids in making an informed decision about production quantities while balancing start-up costs and maximizing profits.
Transcribed Image Text:**The Fly-Right Airplane Company Airplane Production Model** The Fly-Right Airplane Company specializes in building small jet airplanes for corporations. These jets are tailored to the specific needs of corporate executives. The company's customers may request custom designs, which leads to substantial start-up costs and impacts production. Recently, Fly-Right received several purchase requests while their production capacity was nearly fully utilized. Therefore, a decision is required on the number of airplanes to produce for three different customers. Below is a table representing key data for each customer: - **Customer Information Table:** | | Customer 1 | Customer 2 | Customer 3 | |--------------------|------------|------------|------------| | Start-up cost ($million) | 3 | 2 | 0.8 | | Marginal net revenue ($million) | 2 | 4 | 0.8 | | Capacity used per plane (%)| 20 | 40 | 20 | | Maximum order (planes) | 3 | 2 | 5 | - **Start-up Cost:** Initial cost to begin production for each order. - **Marginal Net Revenue:** Profit per airplane produced after subtracting production costs. - **Capacity Used per Plane:** Percentage of production capacity needed per plane. - **Maximum Order:** The highest number of planes requested by each customer. - **Spreadsheet Model Requirement:** 1. **Determine Production Quantity:** - Decide the number of airplanes to produce for each customer to maximize total profit. 2. **Data Entry:** - Enter "1" if a start-up cost is incurred, otherwise enter "0." - Number of planes produced for each customer. - **Input Table:** | | Customer 1 | Customer 2 | Customer 3 | |--------------------|------------|------------|------------| | Start-up? (Enter 1 if "Yes", 0 if "No") | | | | | Planes to produce | | | | - **Determine Total Profit:** - Calculate and round the total profit to one decimal place. This model aids in making an informed decision about production quantities while balancing start-up costs and maximizing profits.
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