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A manufacturing firm has discontinued production of a certain unprofitable product line. Considerable excess production capacity was created as a result. Management is consid -

A manufacturing firm has discontinued production of a certain unprofitable product line.
Considerable excess production capacity was created as a result. Management is consid-
ering devoting this excess capacity to one or more of three products: x1,x2, and x3.
Machine hours required per unit are:
The available time in machine hours per week is:
The salespeople estimate they can sell all the units of x1 and x2 that can be made. But
the sales potential of x3 is 80 units per week maximum.
Unit profits for the three products are:
a. Set up the equations that can be solved to maximize the profit per week.
b. Solve these equations using the Excel Solver.
c. What is the optimal solution? How many of each product should be made, and what
should the resultant profit be?
d. What is this situation with respect to the machine groups? Would they work at capacity,
or would there be unused available time? Will x3 be at maximum sales capacity?
e. Suppose an additional 200 hours per week can be obtained from the milling machines
by using staff overtime. The incremental cost would be $1.50 per hour. Would you
recommend doing this? Explain how you arrived at your answer.
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