Question
WB has been inundated with customers wanting to book their cars for conversion. To assist with scheduling and planning the following costs and hours have
WB has been inundated with customers wanting to book their cars for conversion. To assist with scheduling and planning the following costs and hours have been recorded.
Car battery modifications | |||||
Hatch | Sedan | Wagon | SUV | 4WD | |
Selling Price | $7,000.00 | $7,500.00 | $9,500.00 | $8,400.00 | $12,500.00 |
Costs: | |||||
Raw materials | $1,200.00 | $1,700.00 | $3,000.00 | $2,400.00 | $3,500.00 |
Direct labour | $2,800.00 | $2,250.00 | $3,500.00 | $2,800.00 | $4,500.00 |
Variable overhead | $1,120.00 | $900.00 | $1,400.00 | $1,120.00 | $1,800.00 |
Fixed overhead | $560.00 | $450.00 | $700.00 | $560.00 | $900.00 |
Each of the five makes of cars goes through the same manufacturing process: measuring and assessing, engineering, mechanical works and testing. The time in hours for each make is shown below in the table.
Measuring and assessing | Engineering | Mechanical works | Testing | |
Hours required per car | ||||
Hatch | 1 | 1 | 1.5 | 0.5 |
Sedan | 1 | 2 | 1.75 | 1.5 |
Wagon | 1 | 1 | 1 | 0.5 |
SUV | 2 | 3 | 0.5 | 0.5 |
4WD | 2 | 2 | 1 | 1 |
HOURS AVAILABLE PER MONTH | 720 | 800 | 640 | 320 |
Required:
- Formulate a linear program to determine the expected mix of cars to convert, ensuring that the maximum profit is obtained (2 marks).
- Discuss the key features of your results considering the limitations of using Solver for planning purposes. (2 marks)
- Considering all the information provided, what strategies do you recommend WB take to improve cost and output level? (4 marks)
- LP assumes that there is linearity. How does that apply in practice? Discuss this assumption referring to the solution for WB
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