LP Example – Philco Ceramics

Philco manufactures ceramic souvenirs to visitors to Banff National Park. They

manufacture a ceramic killer whale which contributes $22.00 per unit and a ceramic
moose which contributes $25.00 per unit. Due to their high quality Philco can sell as
many of each item as they can produce, but wants to know the optimum production
strategy for generating the highest total contribution margin.

Additional daily information about the souvenirs is included in the following table:

Killer Maximum
Whale (W) Moose (M) Capacity
Ceramic material used per unit (grams) 1,250.00 500.00 40,000.00
Modeling Machine (MM – Machine min) 25.00 45.00 1,800.00
Glazing Machine (MM – Machine min) 60.00 48.00 2,400.00

1. Write the objective function in mathematical notation.

2. Write any constraints in mathematical notation.

3. Solve the problem using Solver. Put your answers in the blanks below:
(hint: pre-solve CM = $47.00)

# killer whales: __________ # moose: __________ Max CM:____________

4. Which constraints are binding?

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5. If any constraints are not binding explain what the slack number means.

6. If the CM per killer whale decreases by $5.00 would you still use the same solution?

7. If the CM on moose increases to $40.00 per unit, would you still use the same
solution?

8. If the supply of ceramic material decreases by 10,000 grams would you use the same
solution?

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9. Explain the 1E+30 result for the allowable increase in ceramic material.

10. What are shadow prices?

11. Why is there no shadow price for ceramic material?

12. What is the most Philco should be willing to pay for 1 more Glazing Machine
Minute?

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13. If a nearby machine shop offered to sell Philco time on their Modeling machine for
$1.00 per minute. Your shop forewoman thinks this is a fantastic deal and Philco should
accept. Is she correct?

14. If Philco could raise its’ Glazing MM’s to 2,600 from 2,400, would the shadow price
remain the same?

15. If Philco’s Glazing MM’s dropped to 1,900 due to a mechanical problem, would the
shadow price remain the same?

16. What is the relevant range within which the shadow price for Glazing MM’s will not
change the shadow price (range of feasibility)?

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 Philco Ceramics – Solver Reports

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