9/7/2011

R.L. FURNITURES

DMM: CASE STUDY
SUBMITTED TO: Dr. Hitesh Arora

Submitted by: Samridhi Madaan FMG20C ROLL NO.- 201142

and the sofas require lumber and fabric.50/ yard= Rs. Glue and thread are plentiful and represent a relatively insignificant cost that is included in operating expense. What is the most limiting resource to the furniture company? b. Sales prices are Rs. 10/foot= Rs. 40 None 30 minutes None 30 minutes 24 minutes 30 minutes The company’s direct labour expenses are Rs. 17. 400 for end tables. Based on current demand. Determine the product mix needed to maximize the profit at the furniture company. Cut Fabric.70 per hour. 75 10 yards @ Rs. 180 sofas and 400 chairs per month. What is the optimal number of end tables. 100/table None 30 minutes None 30 minutes 24 minutes 60 minutes REQUIRED PER SOFA REQUIRED PER CHAIR 7. 750 for sofas and Rs. at Rs.540 hours of labour.5 board feet @ Rs. Sand.000 per month for the 1. 240 for chairs.A furniture Company produces three types of furniture. Each chair and tables are produced from raw lumber only. 75. Assume that labour cost is fixed and the firm does not plan to hire or fire any employees over the next month. Stain and Assemble. 10/foot= Rs. The specific requirements for each product are as follows: RESOURCE ACTIVITY( QUANTITY AVAILABLE PER MONTH) Lumber( 4350 broad feet) Fabric(2500 yards) Saw lumber (280 hours) Cut fabric (140 hours) Sand (280 hours) Stain (140 hours) Assemble (700 hours) REQUIRED PER END TABLE 10 board feet @ Rs. sofas and chairs to produce each month? c. 48. What is the impact of shadow prices? .End Tables.Saw Lumber. sofas and Chairs. Rs. These products are processed in five departments. 175 24 minutes 24 minutes 6 minutes 12 minutes 90 minutes 4 board feet @ Rs. 10/foot = Rs. the firm can sell 300 end tables. a.

350 Fabric availability 10X2 <=2.4X2 <= 140 Sand availability 0. X2 as the number of sofas. Materials used Lumber Fabric Total Cost Sales Profit Cost of End Tables 100 0 100 400 300 Cost Of Sofas 75 175 250 750 500 Cost of Chairs 40 0 40 240 200 Profit is calculated as follows: Profit = 400X1 + 750X2 +240X3 – 75.5X2 + 4X3 <= 4.5X3 <= 280 Cut availability 0. Profit is calculated as the revenue for each item minus the cost of materials (lumber and fabric) minus the cost of labour. Mathematically we have. and X3 as the number of chairs to produce each month.5X1 + 0.5X1 + 0.2X2 + 0.1X3 <=280 Strain availability 0.4X2 + 0.Solution: Defining X1 as the number of end tables. we subtract this (Rs. 75.000 We have to maximise the profit (Z).4X1 + 0. Since each labour is fixed.500 Saw availability 0.1X2 + 0. Constraints are the following: Lumber availability 10X1 + 7.000) out as a total sum.4X3 <= 140 .

5X3 <= 700 Demand: Table Sofa Chair X1 <= 300 X2 <=180 X3 <= 400 Non.4 0.5 0 0.negativity constraint X1.5 0 0.5 0.5 10 0.5 0. which will look like this: End Tables Changing cells Profit Lumber Fabric Saw cut table Sand Strain Assemble Table Demand Sofa Demand Chair Demand 0 300 10 0 0. X2. which is a fixed labour cost.4 1 1 1 1 Sofas 0 500 7.2 1. X3 >=0.4 0. Also Total amount in profit row is calculated by multiplying the respective values of changing cells with their respective values of profit and we will subtract Rs. .Assemble availability 1X1 + 1.1 0. Problem figure: we will put all the values from the question in excel sheet.5 -75000 0 0 0 0 0 0 0 0 0 0 4350 2500 280 140 280 140 700 300 180 400 Total Limit Since. 75. we will take them as zero as shown in Changing cells row.5 chairs 0 200 4 0 0. we don’t know the number of units produced of each type.4 0.000 from it.5X2 + 0.

Cell $E$5 Name Profit Total Original Value 93000 Final Value 93000 .5 Total 15000 1350 1800 72 72 18 36 270 0 180 0 4350 2500 280 140 280 140 700 300 180 400 Limit Changing cells Profit Lumber Fabric Saw cut table Sand Strain Assemble Table Demand Sofa Demand Chair Demand Step 2: Again by using solver we get the final values where our profit is Rs.5 0. End Tables 260 300 10 0 0.5 0.5 0 0. Wherein we get the number of sofas to be produced which is 180 and the profit is Rs.1 0.000.5 10 0.5 1 1 chairs 0 200 4 0 0.4 0.000.5 0.2 1.5 Total 93000 3950 1800 202 72 148 140 530 260 180 0 4350 2500 280 140 280 140 700 300 180 400 Limit Changing cells Profit Lumber Fabric Saw cut table Sand Strain Assemble Table Demand Sofa Demand Chair Demand Final Result: After solving the problem we get final values as follows: Maximum profit which can be earned is Rs. 93. End Tables 0 300 10 0 0.4 0.5 0 0.5 0 0.1 0. 15.2 1.4 1 1 Sofas 180 500 7.000.4 0. 93.Now we will solve the table in Excel using data solver: Step 1: here we will get the initial values.5 0 0.5 0.4 0.4 1 1 Sofas 180 500 7.5 1 1 Chairs 0 200 4 0 0.4 0.5 10 0.4 0.

. Allowable increase and allowable decrease shows the amount by which if we increase or decrease our objective function respectively. the final values show the number of units produced of each type.9999997 500. Saw and Cut table are not fully utilised.0000006 1E+30 Here. although the profit might change. the final values would remain the same. Sensitivity Analysis: For adjustable cells i. No slack values are there in strain.0000005 199. i.9999993 Allowable Increase 700. Whereas strain is fully utilised. It shows the limit to which we can increase or decrease our objective function coefficient without changing the final values.0000004 Allowable Decrease 100. Fabric.End table 260 units Sofas 180 units And we are not producing Chairs. the variables of objective function: Adjustable Cells Cell $C$4 $D$4 $E$4 Name Changing cells End Tables Changing cells Sofas Changing cells chairs Final Value 260 180 0 Reduced Cost 0 0 -100 Objective Coefficient 299. number of chairs is zero. Cell $B$4 $C$4 $D$4 Name Changing cells End Tables Changing cells Sofas Changing cells chairs Original Value 260 180 0 Final Value 260 180 0 Constraints: Cell $E$7 $E$8 $E$9 $E$10 $E$11 $E$12 $E$13 $E$14 $E$15 $E$16 Name Lumber Total Fabric Total Saw Total cut table Total Sand Total Strain Total Assemble Total Table Demand Total Sofa Demand Total Chair Demand Total Cell Value 3950 1800 202 72 148 140 530 260 180 0 Formula $E$7<=$F$7 $E$8<=$F$8 $E$9<=$F$9 $E$10<=$F$10 $E$11<=$F$11 $E$12<=$F$12 $E$13<=$F$13 $E$14<=$F$14 $E$15<=$F$15 $E$16<=$F$16 Status Not Binding Not Binding Not Binding Not Binding Not Binding Binding Not Binding Not Binding Binding Not Binding Slack 400 700 78 68 132 0 170 40 0 400 This table shows the usage of various constraints out of which lumber.e.0000012 1E+30 100.0000004 350.e.

The limiting resource in the production process is straining capacity. Constraints: Final Cell $F$7 $F$8 $F$9 $F$10 $F$11 $F$12 $F$13 $F$14 $F$15 $F$16 Name Lumber Total Fabric Total Saw Total cut table Total Sand Total Strain Total Assemble Total Table Demand Total Sofa Demand Total Chair Demand Total Value 3950 1800 202 72 148 140 530 260 180 0 Shadow Price 0 0 0 0 0 0 0 Constraint R. 749. 200 (Rs. it shows we can increase the profit by this amount just by employing one additional unit of Strain. Here. the value for 1E+30 is a very large number. the shadow price of strain is 749. especially infinity.99.0000006 180 0 400 Since the shadow prices of Lumber. there will be no impact of its increase or decrease in the profit margin.Rs.99. Fabric.100). we can take benefit of the allowable increase which is 16 hours to increase our profits as 1 hour increase in strain would increase the profit by Rs. 300+ Rs. Saw and cut table is zero. .H. 300. 700) to Rs. But the strain is fully utilised thus there will be no impact of its increase in the profit.Revenue for each table can range from Rs1000 (Rs. Side 4350 2500 280 140 280 700 300 Allowable Increase 1E+30 1E+30 1E+30 1E+30 1E+30 16 1E+30 1E+30 70 1E+30 Allowable Decrease 400 700 78 68 132 104 170 40 80 400 749. Also.9999992 140 350.

Operation Management For Competitive Advantage. Tata McGraw Hill 2. For question. For excel formula. Richards B. Jacob.REFRENCES: 1. Chase and F. .

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