Question

Question 2. What is the impact on profit if we could increase the supply of electronic components by 300 units (to a total of 5,000 units)?

Question 3. How much are we able to increase the supply of electronic components by and use the posted shadow price before we need to run solver again to find new optimal values for our decision variables? Give reasoning.

Question 4. Refer to the question about getting an additional 300 units of electronic components. What would happen if the supplier of these additional 300 units wanted $8 per unit rather than the current cost of $7 per unit? Explain your reasoning.

Question 5. Assume that we have an opportunity to get 250 additional hours of assembly time. However, this time will cost us double the normal 10/hour labour rate. Should we take it? Explain your reasoning.

Question 6. If we force the production of one MP3 player, what would be the net impact on the total profit? How do you know?

Question 7. How profitable must MP3 players each become before Anderson should consider producing them? Show reasoning.

Question 8. Assume that there is some uncertainty in the price the market will pay for Blu-Ray DVD players. For what range of selling prices (note that this is not the same as profits so you may need to look at your spreadsheet solution from lecture) will the current production be optimal? Show your calculations.

Answer 1

2) allowable increase in electronic components = 2800 with shadow price of 2. it means if increase the quantity of electronic component upto 2800 then the profit will increase by 2 for per unit increase in quantity of electronic component. therefore impact on profit if we could increase the supply of electronic components by 300 units (to a total of 5,000 units) = 2 * 300 = 600. i,e profit will increase by $600.

3) we are able to increase the supply of electronic components by 2800 and use the posted shadow price before we need to run solver again to find new optimal values for our decision variables. because the shadow price of 2 is only applicable for allowable increase of electronic component by quantity of 2800.

4) if the supplier of these additional 300 units wanted $8 per unit rather than the current cost of $7 per unit then total increased expense = 300 * (8 - 7) = 300. but since profit is 600 at price of $7 per unit therefore actual profit at price of $8 per unit = 600 - 300 = $300. it means increased cost of $8 per unit is still profitable.

5) assembly hours has shadow price of $24 for allowable increase span of 2500 hours. if we have an opportunity to get 250 additional hours of assembly time. then profit earned using these extra time = 250 * 24 = $6000.

but it will cost us double the normal 10/hour labour rate. therefore additional cost incurred = 250 * 10 = $2500. therefore actual profit earned = 6000 - 2500 = $4500. therefore we should take it.

6) If we force the production of one MP3 player, net impact on the total profit = -1 i,e profit will decrease by $1. it is represented by reduced cost. also it is mentioned that upto an allowable increase in quantity of MP3 player upto 1 unit, the reduced cost is -1 i,e profit will decrease by $1.

Note: as per HOMEWORKLIB RULES minimum 4 subquestions to be answered but we have already answered 5 subquestions i,e question2, 3, 4, 5 and question6. therefore please post the remaining subquestions in a separate question.

Answer 2

Question 2.

ANSWER: The Allowable increase for Electronic components is 2800. So, the increase of 300 is inside the feasibility limit. Therefore, Shadow Price of 2 is applicable. Impact on profit = 300*2 = 600

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Question 3.

ANSWER: The Allowable increase for Electronic components is 2800. Therefore, we can increase the supply of electronic components by 2800 units (to a total of 7500 units), before we need to run solver again.

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Question 4.

ANSWER: the increment cost of these 300 units is $ 1 (=8-7)

The incremental cost is still less than shadow price, which is 2. So, net increase in profit by using these additional 300 units = 300*(-1) = 300

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Question 5.

ANSWER:

The Allowable increase for Assembly time is 466.67. So, the increase of 250 hours is inside the feasibility limit. Therefore, Shadow Price of 24 is applicable. The incremental cost is 10/hour, which is less than shadow price. Therefore, we should take it. Impact on profit = 250*(24-10) = 3500