Case Analysis

Name: Kyla Nicole R. Concepcion Section: ACT214 Date: October 25, 2021

We have a product mix problem where we can produce product x and / or product y. We have two
machines 1 and 2, which are both used in production of x and y. Let us define:
number of units of x produced
x=
month

number of units of y produced

y=
month

The contribution per unit of x is P360, and the contribution per unit of y is P400. With slack terms
added, our problem is:

To maximize Z = P360x + P400y +P0S1 + P0S2

Subject to: 5x + 6y + S1 + 0S2 = 260 hours / month Machine 1 constraint

3x + 2y + 0S1 + S2 = 300 hours / month Machine 2 constraint

The optimal table is reached for this problem as follows:

Cj P 360 P 400 0 0
PM Qty x y S1 S2
360 x 52 1 6/5 1/5 0

0 S2 114 0 -8/5 -3/5 1

ZJ P18,720 360 432 72 0

Cj – Zj 0 - 32 -72 0

Assuming you can produce at the optimal mix, answer the following:
1. How many of each product is produced per month and what is the total monthly contribution?

X= 52 Units per month

S2 = 114 hours

Profit = ₱18,720

 Since y is not in the product mix column, the company is not producing any y at all. (y = 0 unit
per month)

2. A manufacturer offers P10 per hour as rental fee for using Machine 2. He will use machine 2
for 80 hours per month. Will you accept the offer?

 The S2, which is 114 hours, refers to the available hours for machine 2. This indicates that it is
not used in full capacity. Thus, the rent of ₱10 for 80 hours per month will increase the profit
or contribution of the company. This will lead to an increase of ₱800 in our profit. As a result,
the company will accept the offer.

3. One of your customers wishes to purchase two units of y next month. Upon discovering that
you do not produce any y’s he offers to pay you, so that your profit will not be reduced. How
much increase in the price will he be paying?

 The customer needs to pay an additional ₱32 in order to retain the target profit of ₱18,720.
Therefore, the total payment of the customer should be ₱432.

Zj = 49.6 (360) + 2 (432) = ₱18,720

4. Assuming you agree to produce the two units of y next month, how many units of x must be
deleted from the next month’s production schedule?

 To produce a y, we will be needing 6/5 units of x. Therefore, if the company agrees to

produce 2 units of y next month, we will need to delete 2.4 units of x (2 x 6/5) for the next
month’s production schedule.

52 units – 2.4 units = 49.6 units of x

X = 49.6 units per month

Y = 2 units per month

S2 = 114 hours

Profit = 18,720