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PRODUCTION

STRATEGY
BETTER FITNESS INC. (BFI)

Page no. 84-85


BFI wants to manufacture its 2
machines
 BodyPlus 100  BodyPlus 200
2. A frame unit 2. A Frame Unit
3. A Press station 3. A Press Station
4. A Pec -Dec station 4. A Pec -Dec Station
5. A Leg Press station
BodyPlus 100
A Frame Unit( A Press A Pec –Dec
$450) Station Station Total time in
($300) ($250) hrs
Machining
8
& welding
time(hrs)
4 2 2
Painting
and 5
finishing 2 1 2
time(hrs)
Assemblin
g, 2
packaging
& testing
2
(hrs)
BodyPlus 200
A Frame A Press A Pec – A Leg
Unit( Station Total
Dec Press
$450) ($300) time in
Station Station(
hrs
($250) $200)

Machining &
welding
Time (hrs) (MW)
5 3 2 2 12
Painting and
finishing time
(hrs) (PF) 4 2 2 2 10
Assembling,
packaging &
testing (hrs) 2 2
(APT)
Estimated time Labor Cost
Available (hrs) in $ per hr

Machining & welding


Time (hrs) (MW)
600 20
Painting and
finishing time (hrs) 450 15
(PF)

Assembling,
packaging & testing 140 12
(hrs) (APT)

Retail price of BodyPlus100= $2400


and of BodyPlus200= $3500
Some more Data:-
1. Authorized dealer can purchase at 70% of suggested price. i.e.
for dealers:-
BodyPlus 100‘s price =0.70 x 2400 = $1680
and,for BodyPlus 200’s price = 0.70 x 3500 = $1989

2. BFI ‘s President feels that production of BodyPlus 200 should be


at least 25% of total production.

3. Labor cost for BodyPlus 100=(20x8)+(15x5)+(12x2)= $259


and, for BodyPlus 200= (20x12)+(15x10)+(12x2)= $414

4. Raw material cost for BodyPlus 100 = $1050 (with $50 as


assembling ,packaging and testing cost.)
and, for BodyPlus 200 = $1575 (with $75 as assembling ,packaging
and testing cost.)
If only BodyPlus 100 is produced
 Number of BodyPlus that can produced =
Minimum of ( MW constraint 600/8 , PF constraint 450/5, APT
constraint140/2) = 70 pieces.
Total cost= raw material cost + labor cost= 1050 + 259= $1309
Price sold= $1680
Profit= 1680 – 1309 = $371
Total profit for 70 pieces = 371 x 70 = $ 25970
Slack remaining:-
In MW=600- (70x 8) = 40 hrs
In PF = 450 – (70x5)= 100 hrs
If only BodyPlus 200 is produced
 Number of BodyPlus that can produced =
Minimum of ( MW constraint 600/12 , PF constraint 450/10, APT
constraint140/2) = 45 pieces.
Total cost= raw material cost + labor cost= 1575 + 414= $1989
Price sold= $2450
Profit= 2450 – 1989 = $461
Total profit for 70 pieces = 461 x 45 = $ 20745
Slack remaining:-
In MW=600- (45x12) = 60 hrs
In APT = 140 – (45x2)= 50 hrs
To optimize this, we have to
use Linear Programming
Let X1= number of BodyPlus 100 produced
And, let X2= number of BodyPlus 200 produced
MAXIMIZE: 371 X1+461 X2
Subjected To following constraints:-
1) 8 X1+12 X2 =<600
2) 5 X1+10 X2 =<450
3) 2 X1+2 X2 =<140
4) 0.25 X1 -0.75 X2 =<0
OPTIMAL SOLUTION with 4 CONSTRAINTS

Objective Function Value = $ 26233.333

Variable Value Reduced Costs


-------------- --------- ----------------------
X1 50.000 0.000
X2 16.667 0.000

Constraint Slack/Surplus Dual Prices


-------------- -------------------- ------------------
1 0.000 43.722
2 33.333 0.000
3 6.667 0.000
4 0.000 84.889
OPTIMIZE WITH 3 CONSTRAINT

MAXIMIZE 371 X1+461 X2


S.T.
1) 8 X1+12 X2 =< 600
2) 5 X1+10 X2 =< 450
3) 2 X1+2 X2 =< 140
OPTIMAL SOLUTION with 3 CONSTRAINTS

Objective Function Value = $ 26870.000

Variable Value Reduced Costs


-------------- ---------- -----------------------
X1 60.000 0.000
X2 10.000 0.000

Constraint Slack/Surplus Dual Prices


-------------- ------------------- ------------------
1 0.000 22.500
2 50.000 0.000
3 0.000 95.500
End Result
As, we analyze the solution its clear that BFI will
make an extra profit of $636.67( $26870-
$26233.33), if it doesn't go
with BFI ’s President’s word .
THANK YOU