Auto Assembly Case Study

Thrill Seeker Classy Cruiser Supply

Profit 3600 5400
Doors 4 2 20000
Labor 6 10.5 48000
Demand unlimited 3500

Maximize 3600x1 + 5400x2

Sub. To 4x1 + 2x2 ≤ 20000
6x1 + 10.5x2 ≤ 48000
x2 ≤ 3500
x1, x2 ≥ 0
 Thrill Seeker Classy Cruiser Supply
Profit 3600 5400
Doors 4 2 20000
Labor 6 10.5 48000
Demand unlimited 3500
Solution 3800 2400
Profit = $ 26,640,000
X2 : Classy Cruiser

Doors

(1875,3500)

Demand
Labor
X1 : Thrill Seeker
Part b. Does it make sense to spend the money on the advertising
campaign? Why or why not? Will raise demand for classy cruiser by 20
%
Max 3600x1 + 5400x2
4x1 + 2x2 ≤ 20000
New Sol (650,4200)
X2 : Classy Cruiser

6x1 + 10.5x2 ≤ 48000

x2 ≤ 4200 (notice the change)
Doors x1, x2 ≥ 0

Demand

Labor
X1 : Thrill Seeker

profit= $ 25,020,000; Amount spent =$500,000

Net profit= $24,520,000 less than previous
X2 : Classy Cruiser Part c: 25% additional labor is available (change available
labor hrs and solve again)
New Solution: x1 = 3250, x2 = 3500, Z=30,600,000
Doors

Demand

Labor

X1 : Thrill Seeker

Part d: How much extra can be paid for overtime labor?

This payment must not exceed the resultant increase in profit
30,600,000 - 26,640,000 = 3,960,000
X2 : Classy Cruiser Part e: 25% additional labor AND the advertising campaign

New Solution: x1 = 3000, x2 = 4000, Z=32,400,000

Doors

Demand

Labor

X1 : Thrill Seeker

Part f: Does it make sense to implement this solution compared to part a?

Increase in Profit: 32,400,000 - 26,640,000 = 5,760,000
Additional Costs 500,000 + 1,600,000 = 2,100,000
Net increase in Profit 5,760,000 - 2,100,000 = 3,660,000
Important: Ad campaign by itself is useless, but with additional labor
availability, it makes a lot of sense.
 Part g: Thrill Seeker profit is $2800, NOT $3600.

New Solution: x1 = 1875, x2 = 3500, Z=24,150,000

What would have been the profit with original solution?
3800*2800+2400*5400 = 23,600,000

Part h: Thrill Seeker assembly time increases to 7.5 hours

Maximize 3600x1 + 5400x2
Sub. To 4x1 + 2x2 ≤ 20000
7.5x1 + 10.5x2 ≤ 48000
x2 ≤ 3500
x1, x2 ≥ 0

New Solution: x1 = 1500, x2 = 3500, Z=24,300,000

 Part i: Classy Cruiser demand must be fully met
X2 : Classy Cruiser
New Solution: x1 = 1875, x2 = 3500, Z=25,650,000
Decrease in profit = 26,640,000 - 25,650,000 = 990,000
Doors
Much less than 2,000,000.
Demand

X
Labor

X1 : Thrill Seeker
 Part j: implement decisions of parts f, g and h.
X2 : Classy Cruiser
g) Thrill Seeker Profit is $2800
h) Thrill Seeker needs 7.5 hours labor
f) Ad Campaign cost : $500,000
Doors
Overtime labor cost: $1,600,000
Demand Should the Ad campaign be undertaken?
Should the overtime option be exercised?
Labor

X1 : Thrill Seeker

No Ad, No overtime Profit : $23,100,000

Run Ad, but no overtime Profit = $24,136,000 – 500,000 = $23,636,000
Overtime, but no Ad Profit = $27,580,000 – 1,600,000 = $25,980,000
Overtime as well as Ad Profit = 28,610,000 – 2,100,000 = $26,510,000