Assignment

Note: For each of these questions, start from the basic assumptions of the case. Do not carry over additional assumptions from one numbered question to the next.

1. Find the best product mix for Sheridan Motors under the basic assumptions of the case.
2. What is the best product mix if engine assembly capacity is raised to 4,081? What is an extra hour of engine assembly capacity worth?
3. What are 1,000 additional hours of engine assembly capacity worth? What about 1,100 hours?
4. Find the best product mix if it is found that the stamping department spends 2.0 hours on each Model 102 (as in the case), but 3.5 hours on each Model 101.
5. Sheridan Motors is considering introducing a new economy truck, to be called (cleverly enough) the Model 103. The new model requires 2.3 hours of metal stamping capacity and 1.6 hours of engine assembly capacity. The 103's could be assembled in the 101 assembly department; each 103 would require only half as much time as a 101. Each Model 103 truck would give a contribution of $225.
   1. Formulate the production decision with the three trucks as a linear programming problem and then solve the problem to verify that no Model 103's should be produced.
   2. How much would it cost--in terms of contribution--if, for some other reasons, management insisted that at least one Model 103 be made?
   3. How high would the contribution on each 103 have to be before it became attractive to produce the new model?
6. The engine assembly line can be put on overtime. Suppose that efficiencies do not change and that 4,000 machine-hours of overtime capacity are available. If direct labor costs increase by 50% on overtime and if the fixed overhead on the line on overtime is $40,000, the variable overhead remaining the same, would it pay to go on overtime?