Exp

x1 x2 RHS
Obj 7 5 410
C1 4 3 240 <= 240
C2 2 1 100 <= 100

x1 x2
30 40

x1 x2 x3
Obj 50 20 25 2900
C1 9 3 5 499 <= 500
C2 5 4 0 350 <= 350
C3 3 0 2 118 <= 150
C4 1 20 <= 20

x1 x2 x3
26 55 20
Contribution Margin
Model 101 Model 102
Direct Material 24000 20000
Direct Labor
Engine Assemble 1200 2400
Metal Stamping 800 600
Final Assembly 2000 1500
Total Direct Labor 4000 4500
Overheads
Engine Assemble 2100 4000
Metal Stamping 2400 2000
Final Assembly 3500 2500
Total overheads 8000 8500
Total variable cost 36000 33000
Selling price per unit 39000 38000
Contribution margin 3000 5000

Fixed cost analysis

Fixed Cost Model 101 Model 102

Engine Assemble 1700000
Metal Stamping 2700000
Final Assembly 2700000 1500000
Total Fixed cost 8600000
Microsoft Excel 16.0 Answer Report
Worksheet: [IQDM.xlsx]1a
Report Created: 28-10-2019 22:28:20
Result: Solver found a solution. All Constraints and optimality conditions are satisfied.
Solver Engine
Engine: Simplex LP
Solution Time: 0.031 Seconds.
Iterations: 5 Subproblems: 0
Solver Options
Max Time Unlimited, Iterations Unlimited, Precision 0.000001, Use Automatic Scaling
Max Subproblems Unlimited, Max Integer Sols Unlimited, Integer Tolerance 1%, Assume NonNegative

Objective Cell (Max)

Cell Name Original Value Final Value
$E$3 Obj 2400000 2400000

Variable Cells
Cell Name Original Value Final Value Integer
$C$12x 2000 2000 Contin
$D$12y 1000 1000 Contin

Constraints
Cell Name Cell Value Formula Status Slack
$E$4 C1 4000 $E$4<=$F$4 Binding 0
$E$5 C2 6000 $E$5<=$F$5 Binding 0
$E$6 C3 4000 $E$6<=$F$6 Not Binding 1000
$E$7 C4 3000 $E$7<=$F$7 Not Binding 1500
$E$8 C5 2000 $E$8>=$F$8 Not Binding 2000
$E$9 C6 1000 $E$9>=$F$9 Not Binding 1000
Microsoft Excel 16.0 Sensitivity Report
Worksheet: [IQDM.xlsx]1a
Report Created: 28-10-2019 22:28:20

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$C$12 x 2000 0 3000 2000 500
$D$12 y 1000 0 5000 1000 2000

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$E$4 C1 4000 2000 4000 500 500
$E$5 C2 6000 500 6000 500 1000
$E$6 C3 4000 0 5000 1E+030 1000
$E$7 C4 3000 0 4500 1E+030 1500
$E$8 C5 2000 0 0 2000 1E+030
$E$9 C6 1000 0 0 1000 1E+030
1a Obj 3000 5000 2400000
C1 1 2 4000 4000
C2 2 2 6000 6000
C3 2 4000 5000
C4 3 3000 4500
C5 1 2000 0
C6 1 1000 0

x y
2000 1000

1b Engine assembly is binding in nature with a shadow price of 2000,

thus raising capacity by 1 unit will increase profit by the shadow price
One extra unit capacity is worth 2000
x y Profit
1999 1001 2402000

1c
1d Sensitivity analysis table gives the allowable increase for engine capacity as 500

2 Increase in one unit of capacity increases the contribution by $ 2000.

Company can use this alternative by renting 500 machine hours till which contribution
increases after that there is no change in contribution of increased unit in capacity.
Also company should be willing to pay $ 2000 for a rented machine hour.

x y Profit
1500 1500 3400000
Microsoft Excel 16.0 Answer Report
Worksheet: [IQDM.xlsx]Sheet8
Report Created: 28-10-2019 23:01:36
Result: Solver found a solution. All Constraints and optimality conditions are satisfied.
Solver Engine
Engine: Simplex LP
Solution Time: 0.031 Seconds.
Iterations: 6 Subproblems: 0
Solver Options
Max Time Unlimited, Iterations Unlimited, Precision 0.000001, Use Automatic Scaling
Max Subproblems Unlimited, Max Integer Sols Unlimited, Integer Tolerance 1%, Assume NonNegative

Objective Cell (Max)

Cell Name Original Value Final Value
$E$3 0 11000000

Variable Cells
Cell Name Original Value Final Value Integer
$B$13 x 0 2000 Contin
$C$13 y 0 1000 Contin
$D$13 z 0 0 Contin

Constraints
Cell Name Cell Value Formula Status Slack
$E$4 4000 $E$4<=$F$4 Binding 0
$E$5 6000 $E$5<=$F$5 Binding 0
$E$6 4000 $E$6<=$F$6 Not Binding 1000
$E$7 3000 $E$7<=$F$7 Not Binding 1500
$E$8 2000 $E$8>=$F$8 Not Binding 2000
$E$9 1000 $E$9>=$F$9 Not Binding 1000
$E$10 0 $E$10>=$F$10 Binding 0
Microsoft Excel 16.0 Sensitivity Report
Worksheet: [IQDM.xlsx]Sheet8
Report Created: 28-10-2019 23:01:36

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$13 x 2000 0 3000 2000 500
$C$13 y 1000 0 5000 1000 2000
$D$13 z 0 0 2000 350 1E+030

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$E$4 4000 2000 4000 500 500
$E$5 6000 500 6000 500 1000
$E$6 4000 0 5000 1E+030 1000
$E$7 3000 0 4500 1E+030 1500
$E$8 2000 0 0 2000 1E+030
$E$9 1000 0 0 1000 1E+030
$E$10 0 -350 0 2857.142857 0
3a 3000 5000 2000 11000000
1 2 0.8 4000 4000
2 2 1.5 6000 6000
2 1 4000 5000
3 3000 4500
1 2000 0
1 1000 0
1 0 0

x y z
2000 1000 0

Produce zero 103 model trucks

3b Shadow price -350

Thus increase contribution to 2350
Microsoft Excel 15.0 Answer Report
Worksheet: [IQDM_MertonTruck.xlsx]Sheet1
Report Created: 14-11-2019 20:43:07
Result: Solver found a solution. All Constraints and optimality conditions are satisfied.
Solver Engine
Engine: Simplex LP
Solution Time: 0.016 Seconds.
Iterations: 3 Subproblems: 0
Solver Options
Max Time Unlimited, Iterations Unlimited, Precision 0.000001, Use Automatic Scaling
Max Subproblems Unlimited, Max Integer Sols Unlimited, Integer Tolerance 1%, Assume NonNegative

Objective Cell (Max)

Cell Name Original Value Final Value
$D$2 11000000 11000000

Variable Cells
Cell Name Original Value Final Value Integer
$A$1 2000 2000 Contin
$B$1 1000 1000 Contin
$C$1 0 0 Contin

Constraints
Cell Name Cell Value Formula Status Slack
$D$3 4000 $D$3<=$F$3 Binding 0
$D$4 6000 $D$4<=$F$4 Binding 0
$D$5 4000 $D$5<=$F$5 Not Binding 1000
$D$6 3000 $D$6<=$F$6 Not Binding 1500
Microsoft Excel 15.0 Sensitivity Report
Worksheet: [IQDM_MertonTruck.xlsx]Sheet1
Report Created: 14-11-2019 20:43:07

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$A$1 2000 0 3000 2000 500
$B$1 1000 0 5000 1000 2000
$C$1 0 -350 2000 350 1E+030

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$3 4000 2000 4000 500 500
$D$4 6000 500 6000 500 1000
$D$5 4000 0 5000 1E+030 1000
$D$6 3000 0 4500 1E+030 1500
Microsoft Excel 15.0 Limits Report
Worksheet: [IQDM_MertonTruck.xlsx]Sheet1
Report Created: 14-11-2019 20:43:07

Objective
Cell Name Value
$D$2 11000000

Variable Lower Objective Upper Objective

Cell Name Value Limit Result Limit Result
$A$1 2000 0 5000000 2000 11000000
$B$1 1000 0 6000000 1000 11000000
$C$1 0 0 11000000 0 11000000
2000 1000 0
3000 5000 2000 11000000
1 2 0.8 4000 4000
2 2 1.5 6000 6000
2 1 4000 5000
3 3000 4500
4 Maximum increase in engine assembly-500

1 2 4500
x y Profit
1500 1500 3400000

Increased contribution 3400000

Increase in fixed cost 750000
Increase in direct labor 900000
Labor cost saving in Model 101 600000
Net contribution 2350000
Additional revenue -50000
Should not assemble on overtime

5
Obj 3000 5000 1900000
C1 1 2 3750 4000
C2 2 2 6000 6000
C3 2 4500 5000
C4 3 2250 4500
C5 -1 3 0 0

x y
2250 750