PRESCRIPTIVE ANALYTICS

(OPTIMIZATION)

Case Study No. 2

In partial fulfillment of the

Course requirement of LBOMGTS

Team Forecast
Fajardo, Russell Christopher U.
Gabriel, Lana G.
Gugol, Chelcy Mari L.
Pangilinan, Raphael Maria C.
Ricio, David Neil C.
Sarmiento, Bettina L.

K88
Problem

Cobonque Furniture Enterprises is a known maker of fine hand-crafted furniture in Davao

del Sur. During the next production period, management is considering producing dining room
tables, dining room chairs, and/or bookcases. The time required for each item to go through the
two stages of production (assembly and finishing), the amount of wood required (fine cherry
wood), and the corresponding unit profits are given in the following table, along with the amount
of each resource available in the upcoming production period.

Tables Chairs Bookcases Available

Assembly (minutes) 80 40 50 8100

Finishing (minutes) 30 20 30 4500

Wood (pounds) 80 10 50 9000

Unit Profit P360 P125 P300

2. A) Suppose the profit per chair increases by 100. Will this change the optimal production
quantities? Explain the change in total profit.

No. The increase of $100 is less than the allowable increase for the profit per table of
$120. Therefore, the optimal production quantities will stay the same.
The total profit will increase by $100 per table produced, or (20)($100) = $2000, to a total profit
of $48,200.
2. B) Should the profit per table increase by 100 will this change the optimal production
quantities? What can be said about the change in total profit?

Yes, a 100 pesos increase in profit per table was needed. The sensitivity report revealed
that this increase exceeded the allowed profit per chair increment of P88.33. Consequently,
production quantities were adjusted to 0 tables, 90 chairs, and 90 bookcases. This modification
resulted in a profit rise from 46,200 to 47,250 pesos , highlighting the significance of data-driven
decisions in enhancing profitability.
Management Report
1. Develop a linear programming model to determine the production levels that would
maximize profit.

For Cobonque Furniture Enterprises to maximize their profits, they ought to produce 20
tables, 0 chairs, and 130 bookcases. This will then generate a maximum profit of
$46,200.

2. Taking the optimal solution obtained, prepare the corresponding sensitivity report and
address the following:

a.
Suppose the profit per chair increases by 100. Will this change the optimal
production quantities? Explain the change in total profit.

No. The increase of $100 is less than the allowable increase for the profit per table of
$120. Therefore, the optimal production quantities will stay the same. The total profit
will increase by $100 per table produced, or (20) ($100) = $2000, to a total profit of
$48,200.

b. Should the profit per table increase by 100 will this change the optimal production
quantities? What can be said about the change in total profit?

Yes, a 100 pesos increase in profit per table was needed. The sensitivity report
revealed that this increase exceeded the allowed profit per chair increment of P88.33.
Consequently, production quantities were adjusted to 0 tables, 90 chairs, and 90
bookcases. This modification resulted in a profit rise from 46,200 to 47,250 pesos ,
highlighting the significance of data-driven decisions in enhancing profitability.

c.
Assuming the profit per table increases by 90 and the profit per bookcase decreases
by 50. Will this change the optimal production quantities? What can be said about the
change in total profit?
 - Upon increasing the profit per table by 90 and decreasing profit per bookcase
by 50, the optimal production quantities for tables, chairs and bookcases
change from 20, 0 and 30 to 100, 0, and 2 respectively. As a result, the total
profit decreased from P46,200 to P45,500.

d. Suppose a worker in the assembly department calls in sick, so eight fewer hours now
are available in the assembly department. How much would this affect total profit?
Would it change the optimal production quantities?

Since the worker has called in sick, this leads to a decrease in manpower in the
company’s assembly department, while it does not change the company’s optimal
production quantities, it may have some effect on the company’s total achievable
profit leading to a slight decrease from P45,500 to P45,240.

e.
A new worker has been hired who is trained to do both assembly and finishing. She
will split her time between the two areas, so there now are four additional hours
available in both assembly and finishing. How much would this affect total profit?
Would this change the optimal production quantities?

4 hours = 240 minutes is 240/900 = 26.7% of the allowable increase for assembly
time. 4 hours = 240 minutes is 240/360 = 66.7% of the allowable increase for
finishing. 26.7% + 66.7% < 100%, so the 100% rule says that both shadow prices are
valid.

Change in Profit = (Shadow Price)(Right-Hand Side Change)

= (₱2)(240) + (₱6.67)(240)

= ₱480 + ₱1,600

= ₱2,080.
Profit will therefore rise by ₱2,080 to ₱48,280. To benefit from the extra hours and
this higher profit, the optimal production quantities will vary.