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MERTON TRUCK COMPANY
HARSHID DESAI AMRUT MODY SCHOOL OF MANAGEMEMNT ROLL NO. 03
4500.Merton Truck Company Calculating contribution for each truck.x1 + . The algebraic formulation is: Max.x1 + 2.x2 2.x1 + 2.+ 3. 1. + direct labour + variable o/h) = 39000 (24000 + 4000 + 8000) = Rs. 5000/- Decisions variables: x1 = number of model 101 trucks produced.. Contribution for model 101 = selling price (direct mat.x2 2. 6000. Constrains.x2. 4000. 3000.x1 + 5000. Page | 1 . x2 0. 5000. 3000/Contribution for model 102 = selling price (direct mat. + direct labour + variable o/h) = 38000 (20000 + 4500 + 8500) = Rs. x2 = number of model 102 trucks produced.x2 x1.
1 (A) Find best products mix for Merton. Sol. Solving by graphical method as follow.Q. Best product mix for Merton would be Model 101 2000 trucks Model 102 1000 trucks Page | 2 .
Page | 3 . Extra unit of capacity worth is (11002000 11000000) Rs. 2000.Q. from 4000 to 4001 machine hour? What is the extra unit of capacity worth? Sol.1 (B) What would be the best product mix if engine assembly capacity were raised by one unit. Solving by graphical method as follow. As shown in the graph best product mix after raising the capacity by one unit of machine-hour would be model-101 1999 trucks and model-102 1001 trucks.
If we increase the one unit in machine hour capacity increases the contribution by Rs.1 (C) Assume that a second additional unit of engine assembly capacity is worth the same as the first. Sol. whereas if we increase the capacity by 100 units of machine hour i.Q. 2000/-.e from 4000 to 4100 contribution increases by Rs. 200000/.as we seen in Q. Hence it is been verified. then the increase in the contribution would be 100 times that in part (B). 2000/.1 (b) . which is (2000 * 100 times) 100 times of Rs. Verify that if the capacity were increased to 4100 machine hours.. Page | 4 .
1 (D) How many units of engine assembly capacity can be added before there is a change in the value of an additional unit of capacity? Sol. To derive that point of intersection we need to calculate as below. X2 = 1500.(x1) + 2. stamping and model 102 assembly. constrain 1 which is engine assembly machine hour.(x2) = 6000 >> So we get. As shown in the graph above (line 1) i.e.e.Q. we can push it in the opposite direction of origin till it passes through intersection point of (line 2 and line 4) 2nd and 4th constrain i. Finding the value of x1 and x2 using equation >> 2.(x2) = 4500 Page | 5 . and x1 = 1500 3.
= 1.(1500) + 2. unit can be added is (4500 4000 = 500).(1500) = 4500 Therefore.(x2) = 1. of units can be added calculated below. Page | 6 .With the further increase in unit of capacity of engine assembly machine hour (from 4500 to 4501) there is no change in the contribution. So no.(x1) + 2. Substituting the value of x1 and x2 in the below equation.
x2.x2 + 2000.x3 2. Q.x1 + + 1.x2 + x1.x1 + 5000. 1.+ 3.2 Sol.for a rented machine hour. Solving the problem by analytical method by TORA Results are as follow. So it is obvious that company should be willing to pay Rs.8.and company should rent 500 machine hours till which contribution increases after that there is no change in contribution of increased unit in capacity.x3 . 2000/..x1 + 2. 5000. 4000.x2 + 1.5. Company should adopt this alternative as we seen in Q1 (b) and Q (d). The algebraic formulation is: Max. Page | 7 . increase in one unit of capacity inceases contribution by Rs. x2 = number of model 102 trucks produced.Q. x3 0.x2 + 0.x3. 4500.x3 2. 3000. Decisions variables: x1 = number of model 101 trucks produced. Constrains.3 Sol.x1 + 2. x3 = number of model 103 trucks produced. 2000/. 6000.
it becomes worth while to produce the new model.2350/.before it becomes worthwhile to produce. Page | 8 . That is clearly been seen in below table. Column . If we further increase the contribution by even Rs. (b) Contribution on model 103 would be as high as Rs. We can see that in above table in maximum objective coeff. 1/.(a) Merton company should not produce model 103 trucks. As it is been clearly shown in the above result that there is no change in the contribution and also optimum solution is derived by not producing the any truck of model 103.
And optimum solution would remain same as of having 4500 machine hours.e. In addition to that direct labor cost increase by 50% which further reduces company s contribution. stamping and assembly of model 102 does not allow you to produce the higher no. As another constrains i. of units.4 Sol. Page | 9 . So x1 and x2 would be 1500 nos trucks. As we seen in question no. 2 there is no use of increasing the capacity of engine assembly department over 500 machine hours. It is shown in graph below.Q.
So introducing 5th constrain as follow.In above graph contribution decreased for model 101 and model 102 by 600 and 1200 respectively due the increased cost of direct labour by 50%. Q.5 Sol. >> x1 3x2 >> x1 3x2 0 Page | 10 . As asked in the question model 101 truck has to atleast 3 times the model 102 trucks.
---------------------------------------------- Page | 11 . Resulting optimum product mix is Model 101 truck 2250 nos Model 102 truck 750 nos.Adding constrain to the problem and solving using TORA we get.