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Question 1: A manufacturer is trying to determine the combination of two products, A and B, that should be produced. Each product passes through
Question 1: A manufacturer is trying to determine the combination of two products, A and B, that should be produced. Each product passes through a three-stage production process: Stages I, II and III. For product A: Stage I takes 3 hours of labour, Stage II takes 4 hours and Stage III takes 1 hour. For product B: Stage I takes 4 hours, Stage II takes 2 hours and Stage III takes 3 hours. Product A sells for 38 each unit and B for 40 each unit. At present 11 people are employed on Stage I, 12 on Stage II and 10 on Stage III, with all employees working 40 hours each week. (a) Formulate this problem in terms of determining the sales-maximising combination of the two products on a weekly basis. (b) Solve the problem graphically. (c) Confirm the solution using simultaneous equations. (d) Identify the binding and non-binding constraints. (e) Undertake sensitivity analysis on each of the binding constraints and evaluate the management information that this generates. (f) If you know that the Labour hours currently cost 4.50 per hour, determine the profit- maximising combination of the two products. (Profit = sales-cost).
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