Management Science

Group Member

Tan Jo Ann B17080589

Taggy Lian B17080570
Lew Shun Cai B17080553
Xavier Tan Yun Xiang B17080551
Chong Cheah Chun B17080586
 Question 10

Lakesiden Boatworks is planning to manufacture three type of molded fiberglass

recreational boats – a fishing (bass) boat, a ski boat, and a small speed boat. The
estimated selling price and variable cost for each type of boat are summarize in
the following table:
Boat Variable Cost ($) Selling Price
Bass 12,500 23,000
Ski 8,500 18,000
Speed 23,700 26,000

The company has incurred fixed costs of $2,800,000 to set up its manufacturing
operation and begin production. Lakeside has also entered into agreements with
several boat dealers in the region to provide a minimum of 70 bass boats, 50 ski
boats, and 50 speedboats. Alternatively, the company is unsure of what actual
demand will be, so it has decided to limit production to no more than 120 of any
one boat. The company wants to determine the number of boats that it must sell
to break even while minimizing its total variable cost.
Linear Programing Model
Decision Variales :
X1 = Number of Bass boat
X2 = Number of Ski boat
X3 = Number of Speed boat

Objective Function : MinimizeZ = 12,500X1 + 85,000X2 + 13,700X3

Subject to Constraint :
X1 >= 70 (Min of Bass boat)
X2 >= 50 (Min of Ski boat)
X3 >= 50 (Min of Speed boat)
X1,X2,X3 <= 120 (Max of each boat)
10,500X1 + 9,500X2 + 12,300X3 = 2,800,000 (Break-even Point)
Calculation of the function of break-even point

Break-even Point = Selling Price – Total Variable Cost

= Selling Price – Total Variable Cost – Total Fixed Cost
= (23,000 – 12,500)X1 + (18,000 – 8,500)X2 +
(26,000 – 13,700)X3 – 2,800,000
= 10500X1 + 9,500X2 + 12,300X3 – 2,800,000
2,800,000 = 10500X1 + 9,500X2 + 12,300X3

Therefore the function of break-even point is:

10500X1 + 9,500X2 + 12,300X3 = 2,800,000
Solve model by using the computer
Answer Report
Sensitivity Report
Limit Report