MBA 572

Make or buy decision using Excel Solver

The Cleveland Stapler Manufacturing Company forecasts a 5,000unit demand for its SH model during the next quarter. This stapler
is assembled from three major components: base, staple
cartridge, and handle. Until now Cleveland Stapler has
manufactured all three components. However, the forecast of
5,000 units is a new high in sales volume, and the firm doubts
that it will have sufficient production capacity to make all the
components. It is considering contracting a local firm to produce
at least some of the components. The production-time
requirements per unit are given in the Excel data sheet. After
considering the firms overhead, material, and labor costs, the
accounting department has determined the unit manufacturing
cost for each component. These data, along with the purchase
price quotations by the contracting firm are given in the Excel
data sheet. Formulate a linear programming model for the makeor-buy decision for Cleveland Stapler that will meet the 5,000-unit
demand at a minimum total cost.