Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Auto Company of America (ACA) produces four types of cars: subcompact, compact, intermediate, and luxury. ACA also produces trucks and vans. Vendor capacities limit

The Auto Company of America (ACA) produces four types of cars: subcompact, compact, intermediate, and luxury. ACA also produces trucks and vans. Vendor capacities limit total production capacity to at most 1,200,000 vehicles per year. Subcompacts and compacts are built together in a facility with a total annual capacity of 620,000 cars. Intermediate and luxury cars are produced in another facility with capacity of 400,000; and the truck/van facility has a capacity of 275,000. ACAs marketing strategy requires that subcompacts and compacts must constitute at least half of the product mix for the four car types. Profit margins, market potential, and fuel efficiencies are summarized below.

Type

Profit margin ($/vehicle)

Potential sales (in 000s)

Fuel efficiency (MPG)

Subcompact

150

600

40

Compact

225

400

34

Intermediate

250

300

15

Luxury

500

225

12

Truck

400

325

20

Van

200

100

25

The Corporate Average Fuel Efficiency (CAFE) standards require an average fleet fuel efficiency of at least 27 MPG. ACA would like to use a linear programming model to understand the implications of government and corporate policies on its production plans.

Using excel and the solver tool:

1) What is the optimal annual profit for ACA?

2) How much would annual profit drop if the fuel efficiency requirement were raised to 28 MPG?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions