PRODUCTION STRATEGY

BETTER FITNESS INC. (BFI)

Page no. 84-85

BFI wants to manufacture its 2 machines
 2. 3. 4.

BodyPlus 100 A frame unit A Press station A Pec -Dec station

 2. 3. 4. 5.

BodyPlus 200 A Frame Unit A Press Station A Pec -Dec Station A Leg Press station

BodyPlus 100
A Frame Unit( A Press $450) Station ($300)
Machining & welding time(hrs) Painting and finishing time(hrs) Assemblin g, packaging & testing (hrs)

A Pec –Dec Station ($250)

Total time in hrs

4 2

2 1 2

2 2

8 5 2

BodyPlus 200
A Frame A Press Unit( Station $450) ($300) A Pec – Dec Station ($250) A Leg Press Station( $200) Total time in hrs

Machining & welding Time (hrs) (MW) Painting and finishing time (hrs) (PF) Assembling, packaging & testing (hrs) (APT)

5 4

3 2 2

2 2

2 2

12 10 2

Estimated time Available (hrs)
Machining & welding Time (hrs) (MW) Painting and finishing time (hrs) (PF) Assembling, packaging & testing (hrs) (APT)

Labor Cost in $ per hr

600 450 140

20 15 12

Retail price of BodyPlus100= $2400 and of BodyPlus200= $3500

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

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 =
Variable -------------X1 X2 Value --------50.000 16.667

$ 26233.333
Reduced Costs ---------------------0.000 0.000

Constraint -------------1 2 3 4

Slack/Surplus -------------------0.000 33.333 6.667 0.000

Dual Prices -----------------43.722 0.000 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 -------------X1 X2

Value ---------60.000 10.000

Reduced Costs ----------------------0.000 0.000

Constraint -------------1 2 3

Slack/Surplus ------------------0.000 50.000 0.000

Dual Prices -----------------22.500 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