Case Analysis: Merton Truck Company

Course: Decision Analysis

Section D
Group 13
Members:
Arjun Nair
Ashwin Rajamohan Iyer
Himadri Gangwar
Ram Kumar C
Shishir Thade
Soham Roy
Vaibhav Sarode
Case analysis: Merton Truck Company
Let the deision variab!es be as "o!!ows#
$ % No& o" 'ode! ()( tru*s +rodued
y % No& o" 'ode! (), tru*s +rodued
(&
The "o!!owing are the onstraints#
-ngine assemb!y ./ $ 0 ,y 12 3)))
'eta! stam+ing ./ ,$ 0 ,y 12 4)))
'ode! ()( assemb!y ./ ,$ 12 5)))
'ode! (), assemb!y ./ 6y 12 35))
The ost o" +rodution is the sum o" the "o!!owing#
7iret materia!s
7iret !abor
Variab!e overhead
8i$ed ost
Cost o" +rodution 2 9,3))) 0 3))) 0 :)));$ 0 9,)))) 0 35)) 0 :5));y 0
8i$ed ost
Sa!es 2 6<)))$ 0 6:)))y
So= the +ro>t is 9Sa!es % Cost o" +rodution;
Sine the objetive is to ma$imi?e +ro>ts= the objetive "untion wi!! be to
ma$imi?e the "o!!owing#
@ 2 6)))$ 0 5)))y % :4)))))
Asing the So!ver "rom -$e! 9using objetive "untion as 6)))$ 0 5)))y;= adding
the above onstraints= and so!ving= we get the "o!!owing so!ution#
B 2 ,))) and y 2 ())) and the +ro>t is 9(()))))) . :4)))));= that is= ,3)))))
a& The best +rodut mi$ is ,))) units o" 'ode! ()( and ())) units o" 'ode!
(),&
b& The sensitivity re+ort generated by -$e! has been re+rodued here&
Microsoft Excel 12! Sensiti"ity
#eport
$orks%eet:
&MetronTruck'Sol"erxls(S%eet1
#eport Create): 31*!+*2!1!
!!:1,:1-
Adjustab!e Ce!!s

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ase
CDC
5
No& o" tru*s to +rodue
'ode! ()(
,))
) ) 6))) ,))) 5))
CCC
5
No& o" tru*s to +rodue
'ode! (),
())
) ) 5))) ())) ,)))
Constraints

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Si)e
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C7C
(, 'eta! stam+ing Ased
4))
) 5)) 4))) 5)) ()))
C7C
(6 'ode! ()( assemb!y Ased
3))
) ) 5))) (-06) ()))
C7C
(( -ngine assemb!y Ased
3))
) ,))) 3))) 5)) 5))
C7C
(3 'ode! (), assemb!y Ased
6))
) ) 35)) (-06) (5))
8rom the ESensitivity Re+ortF= the a!!owab!e inrease and derease are
observed to be 5)) eah& So= "or an inrease o" ( mahine hour= the
o+tima! +rodut mi$ wou!d be 1888 units of Mo)el 1!1 an) 2!!1 units
of Mo)el 1!2= as the ontribution is more "or 'ode! (),= and other
onstraint o" 'eta! Stam+ing is not re!a$ed& So= it ma*es sense to re!ease
meta! stam+ing used "or ( tru* o" 'ode! ()( and ( engine assemb!y
onsum+tion "rom 'ode! ()( and use these 9re!eased 0 additiona!!y
avai!ab!e; resoure to +rodue one additiona! 'ode! (), tru*& The
inrease in ontribution is Rs& ,)))& This e$tra unit o" engine assemb!y
a+aity is worth #s 2!!!= as observed "rom the shadow +rie&
& Sine the a!!owab!e inrease "or engine assemb!y is 5)) 9"rom the
sensitivity re+ort;= the so!ution a++roah above is va!id "or an inrease o"
())& The ontribution inrease wou!d be ()) times Rs& ,)))&
d& The a!!owab!e inrease in engine assemb!y a+aity= as observed "rom the
sensitivity re+ort is 5))&
,&
Sine the bott!ene* "or +rodution has been the engine assemb!y de+artment=
there is a +ossibi!ity o" getting engine assemb!ed "rom outside& So= so!ving
without the engine assemb!y onstraint= we get the o+tima! +rodut mi$ as (5))
units o" 'ode! ()( and (5)) units o" 'ode! (),& So= the engine assemb!y
mahine hours 9a!u!ated "rom substituting these va!ues in $ 0 ,y 12 3))); wi!!
be eGua! to 35))= whih is in e$ess o" 5)) hours to the avai!ab!e a+aity& The
e$ess reGuirement o" engine assemb!y against avai!ab!e a+aity is 5)) 935)) .
3)));& This reGuirement an be met through renting engine assemb!y&
The new +ro>t "or this +rodution mi$ is observed to be ( mi!!ion in addition to
the origina! +ro>t& So= the ma$imum rent wou!d be 9())))));H95)); 2 Rs& ,)))
+er mahine&
6&
The "o!!owing is onsidering 'ode! ()6 a!one&
The ontribution "rom 'ode! ()6 is Rs& ,)))
Sine 5))) units o" 'ode! ()6 an be +rodued +er month "rom 3))) -ngine
assemb!y mahine hours avai!ab!e= the engine assemb!y mahine hours
reGuirement +er tru* is 3)))H5))) 2 )&: units&
Hene= one unit o" 'ode! ()6 reGuires )&: the +rodution time +er unit o" 'ode!
()(&
Given that one unit hange in mahine hours is worth Rs& ,))) 9as observed
"rom the sensitivity re+ort;= the ost o" +rodution in this ase wou!d be
9)&:;I9,))); 2 (4))&
Simi!ar!y= 3))) units o" 'ode! ()6 an be +rodued in 4))) !abor hours o" meta!
stam+ing= the unit ost o" meta! stam+ing is 4)))H3))) 2 (&5 units& Given that
the shadow +rie "or meta! stam+ing 9"rom sensitivity re+ort; is Rs& 5))= the ost
o" +rodution in this ase wou!d be 9(&5;I95)); 2 J5)
The tota! ost o" +rodution +er unit is 9Rs& (4)) 0 Rs& J5); 2 Rs& ,65)& Sine
the ontribution is Rs& ,)))= there is a !oss o" Rs& 65) +er unit&
a& So= 'ode! ()6 shou!d not be +rodued&
b& The ontribution shou!d be inreased to Rs& 65) at a minimum&
3&
Considering on!y overtime= we an see that the engine assemb!y onstraint wi!!
hange to $ 0 ,y 12 ,)))&
A!so= the new +rodution ost wi!! be 9,3))) 0 3))) I (&5 0 :)));$ 0 9,)))) 0
35)) I (&5 0 :5));y&
Hene= the new objetive "untion "or overtime a!one wi!! be 96<))) % 6:)));$ 0
96:))) % 65,5);y&
Sim+!i"ying= we get the objetive "untion to be ma$imi?ed as ()))$ 0 ,J5)y&
So!ving using -$e! So!ver= the o+tima! so!ution "or overtime a!one amounts to
,J5))))&
An additiona! )&J5 mi!!ion is harged as overheads& That wou!d redue the
ontribution "rom overtime to , mi!!ion&
Sine there is an overa!! +ro>t o" , mi!!ion= they shou!d go ahead with the idea o"
overtime&
5&
There is an additiona! onstraint in addition to those o" Guestion (&
The onstraint in terms o" re!ationshi+ between the number o" units o" 'ode! ()(
and 'ode! (), is
B % 6y /2 )
So!ving using -$e! So!ver with this additiona! onstraint= we get the o+tima!
+rodut mi$ as "o!!ows#
,,5) units o" 'ode! ()( and J5) units o" 'ode! (),&