Microsoft Excel 12.0 Answer Report Worksheet: [merton truck company.

xlsx]Sheet1 Report Created: 01-04-2014 22:11:48

Target Cell (Max) Cell Name $H$6 maximise contribution

Original Value Final Value 11000000 11000000

Adjustable Cells Cell Name M101 Product Mix $C$4 no of units M102 Product Mix $C$5 no of units

Original Value 2000 1000

Final Value 2000 1000

Constraints Cell Name $J$4 Engine Assembly Machine hours $J$5 MetalStamping Machine hours $J$6 101 Assembly Machine hours $J$7 102 Assembly Machine hours

Cell Value 4000 6000 4000 3000

Formula $J$4<=$K$4 $J$5<=$K$5 $J$6<=$K$6 $J$7<=$K$7

Status Binding Binding Not Binding Not Binding

Slack 0 0 1000 1500

Microsoft Excel 12.0 Sensitivity Report Worksheet: [merton truck company.xlsx]Sheet1 Report Created: 01-04-2014 22:11:48

Adjustable Cells Name M101 Product Mix $C$4 no of units M102 Product Mix $C$5 no of units Constraints Cell $J$4 $J$5 $J$6 $J$7 Name Engine Assembly Machine hours MetalStamping Machine hours 101 Assembly Machine hours 102 Assembly Machine hours Final Shadow Constraint Allowable Allowable Value Price R.H. Side Increase Decrease 4000 2000 4000 500 500 6000 500 6000 500 1000 4000 0 5000 1E+30 1000 3000 0 4500 1E+30 1500 Cell Final Reduced Objective Allowable Allowable Value Cost Coefficient Increase Decrease 2000 1000 0 0 3000 5000 2000 1000 500 2000

Microsoft Excel 12.0 Limits Report Worksheet: [merton truck company.xlsx]Limits Report 1 Report Created: 01-04-2014 22:11:48

Target Cell Name $H$6 maximise contribution

Value 11000000

Adjustable Name M101 Product Mix $C$4 no of units M102 Product Mix $C$5 no of units Cell

Value 2000 1000

Lower Limit

Target Result

Upper Limit

Target Result

0 5000000 0 6000000

2000.000005 11000000.02 1000.000003 11000000.01

1. a

MERTON TRUCK COMPANY Computation best product mix Product Mix Product no of units DM DL V OH SP contribution M101 2000 24000 4000 8000 39000 3000 M102 1000 20000 4500 8500 38000 5000 maximise 11000000

1. b

Product mix if engine assembly capacity increased by one unit

Product Mix Product no of units 6000000 M101 1999 M102 1001 As per the sensititvity report, shadow price of Engine assembly capacity is $ 2000, hence extra unit of capacity is w 1. c

since increase in contribution till the addition of 500 units of engine capacity will be in linear way, increse in contr

1. d

As per the sensititvity report, allowable increase of Engine assebly capacity is 500units before any change in value

2 Merton should pursue the suggestion of Production manager to renting engine assembly capacity upto 500 hours Maximum rent payable for outsourced machine hour is Rs. 2000, being the shadow price Maximum number of machine hours is 500 hours

3 As per the answer report, the binding constraints are engine assembly machine hours and Metal assembly machin Units of M101 without changing number of M102 will be minimum of the following with machine hour constraint of model asembly ( 1 hr/truck, total 5000 hrs) 5000 with machine hour constraint of Engine asembly (4000hr-(1000hr*2))*1.25 2500 with machine hour constraint of Metal stamping (6000hr-(1000*2))*.667 2667 possible number of M103 trucks Total contribution from M103 ( $ 2000/truck) Contribution from M101 is since contribution from M101 is higher that M103, Merton shall not produce M103 Minimum contribution to produce M103 2500 5000000 6000000 2400

As per the sensitivity report, the maximum increase in Engine assembly machine hours ( manitaining status quo on other constraints) is only 500 hours. Hence there is no meaning in increasing machine hours to 2000. for further analysis increase in Engine assembly machine hour increase is taken at 500 hours Additional contribution ( allowable increase * shadow price) Less expenses Over time for Direct labour hour $ 1200*250 truck Monthly fixed overhead

1000000 New product Mix ( pl see sheet q m101 300000 m102 750000

Total saving Merton is not advised to assemble engine overtime 5

-50000

Computation revised product mix to maintain brand image Product Mix Product no of units DM DL V OH SP contribution M101 24000 4000 8000 39000 3000 M102 20000 4500 8500 38000 5000 maximise 0 computation in sheet "q no 5" Product Mix no of units 2250 750

Product M101 M102

Engine Assembly MetalStamping 101 Assembly 102 Assembly

Machine hours 4000 6000 4000 3000

4000 6000 5000 4500

ence extra unit of capacity is worth $ 2000

n linear way, increse in contribution will be 100 times if capacity is incresed by 100 units instead of 1 unit

its before any change in value. Hence extra unit of capacity is worth $ 2000

mbly capacity upto 500 hours

s and Metal assembly machine hours. units units units units

unit per engine assembly hour for M103 unit per metal stamping hour for M103

1.2500 0.666667

urs ( manitaining reasing machine se is taken at 500 hours

w product Mix ( pl see sheet q no 4) 1500 1500

Engine Assembly MetalStamping 101 Assembly 102 Assembly Ratio

Machine hours 0 0 0 0 3M101>=M102

4000 6000 5000 4500

Computation revised product mix to maintain brand image Product Mix no of units DM DL 2250 24000 750 20000

Product M101 M102

V OH 4000 4500 8000 8500

SP

contribution 39000 3000 Engine Assembly 38000 5000 MetalStamping maximise 10500000 101 Assembly 102 Assembly Ratio

Machine hours 3750 6000 4500 2250 2250

4000 6000 5000 4500 2250

Revised product mix with extra 500 hours Product Mix no of units DM DL 1500 24000 1500 20000

Product M101 M102

V OH 4000 4500 8000 8500

SP

contribution 39000 3000 Engine Assembly 38000 5000 MetalStamping maximise 12000000 101 Assembly 102 Assembly

Machine hours 4500 6000 3000 4500

4500 6000 5000 4500