- The Wacker Company manufactures two types of lawn trimmers: an electric model and a gas model. The company has contracted to supply a national discount retail chain with a total of 25,000 electric trimmers and 20,000 gas trimmers. However, Wacker’s production capability is limited in three departments: production, assembly, and packaging. The following table summarizes the hours of processing time available and the processing time required by each department, for both types of trimmers:
Hours Required per Trimmer Electric Gas Hours Available Production 0.20 0.40 10,000 Assembly 0.30 0.50 15,000 Packaging 0.10 0.10 5,000
The company makes its electric trimmer in-house for $55 and its gas trimmer for $85. Alternatively, it can buy electric and gas trimmers from another source for $67 and $95, respectively.
a. Develop a spreadsheet model to determine how many gas and electric trimmers the company should make and how many it should buy to fulfill its contract in the least costly manner.
Use a Sensitivity Report to answer the following:
b. If the cost to make gas trimmers increased to $90 per unit, how would the optimal solution change? Explain.
c. How much should the company be willing to pay to acquire additional capacity in the assembly area? Explain.
d. How much should the company be willing to pay to acquire additional capacity in the production area? Explain.
e. What will happen to total cost if the demand for electric trimmers increases by 1,000? Explain.
- The ELC Corporation manufactures two industrial-sized electrical devices: generators and alternators. Both of these products require wiring and testing during the assembly process. Each generator requires 4 hours of wiring and 2 hour of testing and can be sold for a $450 profit. Each alternator requires 6 hours of wiring and 1 hours of testing and can be sold for a $200 profit. There are 260 hours of wiring time and 140 hours of testing time available in the next production period and ELC wants to maximize profit.
a. Formulate a spreadsheet model and use Solver to solve this LP problem. Copy and paste model below.
b. Suppose the company can acquire additional wiring time at a very favorable cost. Should it do so? Why or why not?
c. How much of a premium (above current costs) would the company be willing to spend to get an extra hour of testing time?
