Data

Calculation

Body Plus 100

Frame
Press
Pec-dec Station
Ass/Test/Packing
Totals

Body Plus 200

Frame
Press
Pec-dec Station
Legpress
Ass/Test/Packing
Totals

Hours
Machining & Welding
4
Painting & Finising
2
Machining & Welding
2
Painting & Finising
1
Machining & Welding
2
Painting & Finising
2
2
Mach. & Weld. Hrs
Paint. & Finish Hrs
Ass/Test/Pack. Hrs

8
5
2

Data
Hours
Machining & Welding
5
Painting & Finising
4
Machining & Welding
3
Painting & Finising
2
Machining & Welding
2
Painting & Finising
2
Machining & Welding
2
Painting & Finising
2
2
Mach. & Weld. Hrs
Paint. & Finish Hrs
Ass/Test/Pack. Hrs

Let #
Units Produced for Body Plus 100 =
Units Produced for Body Plus 200 =

X
Y

Objctive Function : Max ($371 X + $461 Y)

12
10
2

M. Cost
$450
$300
$250
$50
$1,050

L.Cost
$20
$15
$20
$15
$20
$15
$12

Retail
$2,400

$259

Calculation
M. Cost
$650
$400
$250
$200
$75
$1,575

L.Cost
$20
$15
$20
$15
$20
$15
$20
$15
$12

Retail
$3,500

$414

50
16.666667
$26,233.33

Constraints

Mach. & Weld. Hrs

Painting & Finising
Ass/Test/Packing
Body Plus 200 0.25
of total Units Produced
Body Plus 100 0
Body Plus 200 0

= 8 X + 12 Y
= 5 X + 10 Y
=2X+2Y
= Y 0.25*(X + Y)
= 0.25 X - 0.75 Y
=X0
=Y0

600
416.66667
133.33333
0
0
50
16.666667

Price
$1,680

<=
<=
<=
<=
>=
>=

600
450
140
0
0
0
0

Price
$2,450

Calculation
Profit / Unit
Price - Total Cost

$371

Calculation
Profit
Price - Total Cost

$461

Data

Calculation

Body Plus 100

Frame
Press
Pec-dec Station
Ass/Test/Packing
Totals

Body Plus 200

Frame
Press
Pec-dec Station
Legpress
Ass/Test/Packing
Totals

Hours
Machining & Welding
4
Painting & Finising
2
Machining & Welding
2
Painting & Finising
1
Machining & Welding
2
Painting & Finising
2
2
Mach. & Weld. Hrs
Paint. & Finish Hrs
Ass/Test/Pack. Hrs

M. Cost
$450
$300
$250
$50

8
5
2

$1,050

Data
Hours
Machining & Welding
5
Painting & Finising
4
Machining & Welding
3
Painting & Finising
2
Machining & Welding
2
Painting & Finising
2
Machining & Welding
2
Painting & Finising
2
2
Mach. & Weld. Hrs
Paint. & Finish Hrs
Ass/Test/Pack. Hrs

Let #
Units Produced for Body Plus 100 =
Units Produced for Body Plus 200 =

X
Y

Objctive Function : Max ($371 X + $461 Y)

L.Cost
$20
$15
$20
$15
$20
$15
$12

Retail
$2,400

$259

Calculation
M. Cost
$650
$400
$250
$200
$75

12
10
2

$1,575

L.Cost
$20
$15
$20
$15
$20
$15
$20
$15
$12

Retail
$3,500

$414

60
10
$26,870.00

Constraints

Mach. & Weld. Hrs

Painting & Finising
Ass/Test/Packing
Body Plus 200 0.25
of total Units Produced
Body Plus 100 0
Body Plus 200 0

= 8 X + 12 Y
= 5 X + 10 Y
=2X+2Y
= Y 0.25*(X + Y)
= 0.25 X - 0.75 Y
=X0
=Y0

Price
$1,680

600
400
140
7.5
0
60
10

<=
<=
<=
<=
>=
>=

By removing contsraint Body Plus 200 volume constraint, profits increased by

600
450
140
0
0
0
0

$637

Price
$2,450

Calculation
Profit / Unit
Price - Total Cost

$371

Calculation
Profit
Price - Total Cost

$461

Reducing the cycle of time or increasing capacity of Machining & Welding. This is the bottle neck of current machine manufac

neck of current machine manufacturing operation

Security Systems
Discountted SS

1
2
3
600000
600000
250000
600000 555555.6 214334.7

Market Analysis
Discounted MA

$500,000 $350,000 $400,000

$500,000 $324,074 $342,936

Max Inv. Power

Discounted

$800,000 $700,000 $500,000

$800,000 $648,148 $428,669

%SS
%MA
Objective Function

Constraints
First Yea Max
Second Year Max
Third Year Max
Q1. Answer
%SS
%MA
NPV of Investment

1800000

1600000

0.608697732
0.869562721
Max (1800000 %SS + 1600000 %MA)
2486956.272

=600000 * %SS + 500000 * $MA

=555556 * %SS + 324074* $MA
=214335 * %SS + 342936 * $MA

0.608697732
0.869562721
$1,848,637.14

Q2.
Year 1
SS
$365,219
MA
$434,781
Total HVC Investment
$800,000
Q3.

8%

Year 2
$365,219
$304,347
$669,566

Year 3
$152,174
$347,825
$500,000

$800,000
$619,968
$428,669

800000
648148
428669

Security Systems
Discountted SS

1
2
3
600000
600000
250000
600000 555555.5556 214334.7051

Market Analysis
Discounted MA

$500,000
$500,000

$350,000
$324,074

$400,000
$342,936

Max Inv. Power

Discounted

$900,000
$900,000

$700,000
$648,148

$500,000
$428,669

%SS
%MA
Objective Function

Constraints
First Yea Max
Second Year Max
Third Year Max

Q1. Answer
%SS
%MA
NPV of Investment

8%

1800000

1600000

0.68852527
0.819670509
Max (1800000 %SS + 1600000 %MA)
2550818.3

=600000 * %SS + 500000 * $MA

=555556 * %SS + 324074* $MA
=214335 * %SS + 342936 * $MA

$822,950
$648,148
$428,669

900000
$648,148
$428,669

0.608697732
0.869562721
1848637.141

Q2.
SS
MA
Total HVC Investment

Year 1
Year 2
Year 3
$365,219
$365,219
$152,174
$434,781
$304,347
$347,825
$800,000
$669,566
$500,000

Q3.
An additional $100,000 investment in the first year would result in additional
63862.03 Present value of $63862.03 that
64%
Q4.
SS
MA
Total HVC Investment

Year 1
Year 2
Year 3
$413,115
$413,115
$172,131
$409,835
$286,885
$327,868
$822,950
$700,000
$500,000

Q5.
We would not advise additional investment of $100,000, as it results in the marginal profits of only $54751.4 (PV).
Q6.

Present value of $63862.03 that would be received after three years would be

of only $54751.4 (PV).

54751.4