Management Science: Sensitivity Analysis

I & II.

The Xecko Tool Company is considering bidding on a job for two airplane wing parts. Each wing part must be
processed through three manufacturing stages; stamping, drilling, and finishing for which the company has limited
available hours. The linear programming model to determine how many of part 1 (x_1) and part 2 (x_2) the
company should produce in order to maximize its profit is as follows:

Maximize Z = $650x1 + 910x2

Subject to 4x1 + 7.5x2 ≤ 105 (stamping, hr.)

6.2x1 + 4.9x2 ≤ 90 (drilling, hr.)

9.1x1 + 4.1x2 ≤ 110 (finishing, hr.)

x1, x2 ≥ 0

A. What is the sensitivity range for part 1?

- 485.3333 ≤ C₁ ≤ 1151.429

B. What is the sensitivity range for part 2?

- 513.7097 ≤ C₂ ≤ 1218.75

C. What is the sensitivity range for stamping?

 - 89.07147 ≤ Q₁ ≤ 137.7551

D. What is the sensitivity range for drilling?

- 68.9 ≤ Q₂ ≤ 95.8891

E. What is the sensitivity range for finishing?

- 98.6487 ≤ Q₃ ≤ ∞

F. What is the shadow price for stamping, drilling, and finishing?

- The shadow price for stamping is $91.34 per hour, and the shadow price for clay is $45.91 per hour and
there is a $0 shadow price for finishing .

G. What is the effect on the profit when the stamping time is reduced to 80 hours?
- The profit is decreased by $2437.44 if the stamping time is reduced to 80 hours.
H. What is the effect on the profit when the stamping time is increased to 125 hours?
- The profit is increased by $1826.77 if the stamping time is increased to 125 hours.

J. What is the effect on the profit when the drilling time is reduced to 70 hours?
- The profit is decreased by $918.22 if the drilling time is reduced to 70 hours.
K. What is the effect on the profit when the drilling time is increased to 95 hours?
- The profit is increased by $229.55 if the drilling time is increased to 95 hours.
L. What is the effect on the profit when the finishing time is reduced to 100 hours?
- The profit remains the same even if the finishing time is reduced to 100 hours.

M. What is the effect on the profit when the finishing time is increased to 150 hours?
- The profit remains the same even if the finishing time is increased to 150 hours.
III. What is the significance of knowing sensitivity analysis in your future work as a manager of a company?

- Being a manager means also being a decision-maker in a company. Sensitivity analysis aids a manager
evaluating the effects of changes in important input variables on the results of financial models by using
the potent financial modeling technique. Sensitivity analysis helps firms uncover potential risks and
opportunities by examining the interactions between independent and dependent variables, which
enhances the caliber of their financial decision-making.