Question
Create a Decision Tree from the data below: Company A, produced and distributed a wide range of cosmetics. The main products are a face cream,
Create a Decision Tree from the data below:
Company A, produced and distributed a wide range of cosmetics. The main products are a face cream, a body cream, and a hand cream. With sales approaching $150 million annually, Company A had experienced double-digit growth over the past few years. Its marketing department estimated that the demand for the three products for the upcoming quarter were 12,000 cartons of face cream, 8,000 cases of body cream, and 18,000 cases of hand cream. The manufacturing process consisted of a two-stage production procedure that used four ingredients: purified water, oil, scents and colors, and emulsifiers. Stage 1 involved materials preparation and initial mixing while stage 2 focused on final blending and packaging. Company As available first-shift capacity for the next quarter was 15,000 labor-hours for stage 1 and 10,000 for stage 2. The first-shift hourly rate was $8.50 for stage 1 and $9.25 for stage 2. A second shift was available with a 10 per cent reduction in capacity and a 10 per cent increase in wage rates. The cost for raw materials was $1 per pound for purified water, $1.50 per pound for oil, $3 per pound for scents and colors, and $2 per pound for emulsifiers. The production department had available 200,000 pounds of purified water, 50,000 pounds of oil, 7,500 pounds of scents and colors, and 15,000 pounds of emulsifiers (see Exhibit 1). Company A could also subcontract with a local supplier for the face cream and body cream at a cost of $40 per carton and $55 per carton, respectively. This vendor had the capacity to meet the demand requirements that were in excess of Company As capabilities. Based on the boards direction, Company A decided not to use the vendor for the production of hand cream. The CEO recognized that other vendor arrangements could include producing critical sub-components of the products (e.g., water-oil solutions). Company A planned to explore this possibility as a future production option.
Criteria/Vendor | Face Cream | Body Cream | Hand Cream |
Labor (hour/carton) |
|
|
|
Stage 1 | 1.5 | 1.8 | 1.0 |
Stage 2 | 0.8 | 1.0 | 0.5 |
Material (pounds/carton) |
|
|
|
Water | 8.0 | 6.0 | 7.0 |
Oil | 1.0 | 3.0 | 2.0 |
Scents and Colors | 0.5 | 0.3 | 0.4 |
Emulsifiers | 0.5 | 0.7 | 0.6 |
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