Fabrics and Fall Fashion

• Katherine Rally owns TrendLines, an elite women’s

clothing company
• To determine the quantity of each clothing item to be
produced next month
• Constraints: Production capacity, limited resources and
demand forecasts
• Objective: Maximize profit
 Fabrics and Fall Fashion
Total Fixed Expenditure

Amount paid to six designers: $860,000

Expenditure for conducting three fashion shows: $8,100,000
Total Expenditure: $8,960,000
 Fabrics and Fall Fashion
Data (Material Requirement, Price and Production Costs)

Fall Professional fashion

 Fabrics and Fall Fashion
Data (Material Requirement, Price and Production Costs)

Fall Casual fashions

 Fabrics and Fall Fashion
Material Ordered and Prices

Material Ordered (Yards) Price per yards ($)

Wool 45,000 9.00
Acetate 28,000 1.50
Cashmere 9,000 60.00
Silk 18,000 13.00
Rayon 30,000 2.25
Velvet 20,000 12.00
Cotton 30,000 2.50
 Fabrics and Fall Fashion
Demand Forecasts

Clothing Item Demand Forecast

Tailored Wool Slack At least 4,200 and At most 7000
Cashmere Sweater 4,000
Silk Blouse 12,000
Silk Camisole 15,000
Tailored Skirt At least 2,800
Wool Blazer At least 3,000 and At most 5000

Velvet Pants 5,500

Cotton Sweater No Limit
Cotton Miniskirt No Limit
Velvet Shirt 6,000
Button-down Blouse No Limit
 Fabrics and Fall Fashion
Other specifications

• Unused material can be sent back for full refund

• Scrap material cannot be sent back
• If silk blouse is produced, then silk camisole is also
produced
• If cotton sweater is produced, then a cotton miniskirt is also
produced
• Both silk camisole and cotton miniskirt can be produced
separately also
 Fabrics and Fall Fashion
Profit per Item = Price – (Material Cost + Labor and Machine Cost)

Clothing Item Profit per unit ($)

Tailored Wool Slack 110.00
Cashmere Sweater 210.00
Silk Blouse 60.50
Silk Camisole 53.50
Tailored Skirt 143.25
Wool Blazer 155.25
Velvet Pants 136.00
Cotton Sweater 66.25
Cotton Miniskirt 33.75
Velvet Shirt 22.00
Button-down Blouse 26.63
 Fabrics and Fall Fashion
Decision Variables

Fall Professional fashion

Tailored Wool Slacks: x1 Cashmere Sweater: x2
Silk Blouse: x3 Silk Camisole: x4
Tailored Skirt: x5 Wool Blazer: x6

Fall Casual fashion

Velvet Pants: x7 Cotton Sweater: x8
Cotton Miniskirt: x9 Velvet Shirt: x10
Button-down Blouse: x11
 Fabrics and Fall Fashion
Solution (a)

Maximum Expected Profit = 22*6,000 = 132,000

This amount will not be enough to cover the $ 500,000 in
fixed cost directly attributed to this product.
 Fabrics and Fall Fashion
Solution (b): LP Model
Maximize:
110 x1 + 210 x2 + 60.5 x3 + 53.5 x4 + 143.25 x5 + 155.25 x6 +
136 x7 + 66.25 x8 + 33.75 x9 + 22 x10 + 26.63 x11
Subject to (Demand Constraints):
x7 <= 5,500
x10 <= 6,000
x2 <= 4,000
x3 <= 12,000
x4 <= 15,000
x1 >= 4,200 and x1 <= 7,000
x5 >= 2,800
x6 >= 3,000 and x6 <= 5000
 Fabrics and Fall Fashion
Solution (b): LP Model
Subject to:
(Material Constraints)
3x1 + 2.5x6 <= 45,000 (Wool)
2x1 + 1.5x5 + 1.5x6 + 2x7 <= 28,000 (Acetate)
1.5x2 <= 9,000 (Cashmere)
1.5x3 + .5x4 <= 18,000 (Silk)
2x5 + 1.5x11 <= 30,000 (Rayon)
3x7 + 1.5x10 <= 20,000 (Velvet)
1.5x8 + .5x9 <= 30,000 (Cotton)
x4 >= x3
x9 >= x8
 Fabrics and Fall Fashion
Solution (b): LP Solution
Profit: $6862980
Profit: $6862933 (By converting to integers)
Clothing Item Quantity
Tailored Wool Slack 4,200
Cashmere Sweater 4,000
Silk Blouse 7,000
Silk Camisole 15,000
Tailored Skirt 8066.667 = 8067
Wool Blazer 5,000

Velvet Pants 0
Cotton Sweater 0
Cotton Miniskirt 60,000
Velvet Shirt 6,000
Button-down Blouse 9244.444 = 9244
 Fabrics and Fall Fashion
Solution (b)

Total Loss = $6862933 - $8,960,000 = $2097067

 Fabrics and Fall Fashion
Solution (c): LP Solution
Profit: $7074901

Clothing Item Quantity

Tailored Wool Slack 4,200
Cashmere Sweater 4,000
Silk Blouse 7,000
Silk Camisole 15,000
Tailored Skirt 3177.78 = 3178
Wool Blazer 5,000

Velvet Pants 3666.67 = 3667

Cotton Sweater 0
Cotton Miniskirt 60,000
Velvet Shirt 6,000
Button-down Blouse 15762.96 = 15763
 Fabrics and Fall Fashion

Solution (c)

Total Fixed Costs = 8,960,000 + 20000*12 = $9,200,000

Total Loss = $ 7074901 - $9,200,000 = $2,125,099
 Fabrics and Fall Fashion
Solution (d)

• Since the cost of velvet could not be recovered, it is no longer

a variable cost. It now a sunk cost. Thus, the increased net
contribution of velvet items make them more attractive to
produce.
• This way the revenues from these items can contribute to the
recovery of some of the fixed costs.
• These items also require some acetate and thus their
production affects the production plan for all other items.
 Fabrics and Fall Fashion
Solution (e): LP Solution
Profit: $6,527,966
Profit: $6,527,933.33 (By converting to integers)
Clothing Item Quantity
Tailored Wool Slack 4,200
Cashmere Sweater 4,000
Silk Blouse 7,000
Silk Camisole 15,000
Tailored Skirt 10066.67 = 10067
Wool Blazer 3,000

Velvet Pants 0
Cotton Sweater 0
Cotton Miniskirt 60,000
Velvet Shirt 6,000
Button-down Blouse 6577.78 = 6678
 Fabrics and Fall Fashion

Solution (e)

Total Loss = $ 6,527,933.33 - $8,960,000 = $2,432,067

 Fabrics and Fall Fashion
Solution (f): LP Solution
Profit: $7,581,269
Profit: $7,581,267 (By converting to integers)
Clothing Item Quantity
Tailored Wool Slack 4,200
Cashmere Sweater 4,000
Silk Blouse 7,000
Silk Camisole 15,000
Tailored Skirt 14733.33 = 14733
Wool Blazer 5,000

Velvet Pants 0
Cotton Sweater 0
Cotton Miniskirt 60,000
Velvet Shirt 6,000
Button-down Blouse 355.56 = 356
 Fabrics and Fall Fashion

Solution (f)

Total Loss = $ 7,581,267 - $8,960,000 = $1,378,733

 Fabrics and Fall Fashion

Solution (g)

Try on your own