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Daniel Cooper is the production manager of Hot Wheels, Inc., a wheel manufacturing company. Daniel has just received orders for 1,000 standard wheels and
Daniel Cooper is the production manager of Hot Wheels, Inc., a wheel manufacturing company. Daniel has just received orders for 1,000 standard wheels and 1,250 deluxe wheels next month and for 800 standard and 1,500 deluxe wheels the following month. All orders are to be filled. The cost of producing standard wheels is $10 and the cost for deluxe wheels is $16. Overtime rates are 50% higher. There are 1,000 hours of regular time and 500 hours of overtime available each month. It takes 0.5 hour to make a standard wheel and 0.6 hour to make a deluxe wheel. The cost of storing one wheel from one month to the next is $2. Daniel wants to develop a two-month production schedule for standard and deluxe wheels at the lowest costs. A. If Daniel wants to use a linear programming (LP) approach to solve this problem, what decision variables would he specify in his model? B. Formulate the algebraic model for a linear program that minimizes Hot Wheel's production costs. C. Using Excel Solver, find an optimal solution to the problem using the formulation given in part (B) above. What is the optimal allocation plan, and what is the total revenue? D. Obtain a sensitivity report for the spreadsheet model in part (C). Interpret the shadow price for each of the constraints in the model. E. Based on the sensitivity report, which resource(s), if any, should Hot Wheels work to increase? Why?
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