Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Section 1 ; Group 2FT 12113          Anuja DashFT 12102          Abhay BohraFT 12189          Pramod Ravi ShankarFT 12127 ...
Specification                                          Model 101                  Model 102DM                             ...
Fixed OverheadEngine assembly                                        1700000Metal Stamping                                ...
Engine Assembly            1* Model 101       2* Model 102 <=             4000Metal Stamping             2* Model 101     ...
VariablesModel 101        Model 102      Objective        2000             1000      2400000                              ...
Sensitivity Analysis                         Final    Reduced       Objective        Allowable         Allowable          ...
Shadow price of Engine Assembly is 2000 $So if Assembly unit capacity is increased from 4000 to 4001 thenExtra unit Engine...
If capacity of Engine Assembly is increased to 4100Increase in profit due to 100 unit increase in production capacity     ...
500 Units of Engine Assembly capacity can be added before it capacityworth changes.Profit at 4500 & 4501 is same i.e. prod...
Max We can have 500 Hr increase in capacity and profit ContributionIncrease 2000$ per hrSo max we can pay that much       ...
ConstraintsEngine Assembly                         1 2    0.8         4000 <=          4000Metal Stamping                 ...
We should not produce Model103               Variables  Model 101   Model 102    Model103       Objective       2000      ...
Final   Reduced      Objective      Allowable       Allowable        Name             Value    Cost      Coefficient      ...
Model 103 CM should be more than > 2350 in order to make it worthyof productionWith 2351 CM for Model 103 we get the follo...
Clearly from sensitivity analysis 500 Units of Engine Assembly capacity can beadded. More than that will make no improveme...
ConstraintsEngine Assembly                            1 2             4500 <=        6000Metal Stamping                   ...
So Additional revenue =-50000$          VariablesModel 101       Model 102       Objective         1500            1500   ...
We have to add new constraint of product mix                            Constraints Engine Assembly                       ...
Additional Contribution Due to this decision is =2400000$ - 1900000$                                                =50000...
Section 1: Group 2: PAAATH   4/8/2012   20
Upcoming SlideShare
Loading in …5
×

Merton Truck Company

25,657 views

Published on

Merton Truck Company case analysis

Merton Truck Company

  1. 1. Section 1 ; Group 2FT 12113 Anuja DashFT 12102 Abhay BohraFT 12189 Pramod Ravi ShankarFT 12127 Harendra SinghFT 12168 Tushar AroraFT 12104 Abhilash Mohapatra
  2. 2. Specification Model 101 Model 102DM 24000 20000 Direct LabourEngine assembly 1200 2400Metal Stamping 800 600Final Assembly 2000 1500Total DL 4000 4500 Variable OverheadEngine assembly 2100 4000Metal Stamping 2400 2000Final Assembly 3500 2500Total Variable Overhead 8000 8500Selling Prices 39000 38000Total Variable Cost 36000 33000Contribution Margin per Unit 3000 5000 Section 1: Group 2: PAAATH 4/8/2012 2
  3. 3. Fixed OverheadEngine assembly 1700000Metal Stamping 2700000Final Assembly 2700000 1500000Total Fixed Over Head 8600000 Section 1: Group 2: PAAATH 4/8/2012 3
  4. 4. Engine Assembly 1* Model 101 2* Model 102 <= 4000Metal Stamping 2* Model 101 2* Model 102 <= 6000Model 101 assembly 2* Model 101 0* Model 102 <= 5000Model 102 assembly 0* Model 101 3* Model 102 <= 4500Non Negative Model 101 1* Model 101 0* Model 102 >= 0Non Negative Model 102 0* Model 101 1* Model 102 >= 0Maximize Profit = UCM Model 101*units Model 101+ UCM Model 102*units Model 102 -Fixed Overheads Section 1: Group 2: PAAATH 4/8/2012 4
  5. 5. VariablesModel 101 Model 102 Objective 2000 1000 2400000 Section 1: Group 2: PAAATH 4/8/2012 5
  6. 6. Sensitivity Analysis Final Reduced Objective Allowable Allowable Name Value Cost Coefficient Increase DecreaseModel 101 2000 0 3000 2000 500Model 102 1000 0 5000 1000 2000 Final Shadow Constraint Allowable Allowable Name Value Price R.H. Side Increase DecreaseEngine Assembly 4000 2000 4000 500 500Metal Stamping 6000 500 6000 500 1000Model 101 assembly 4000 0 5000 1E+30 1000Model 102 assembly 3000 0 4500 1E+30 1500Non Negative Model 101 2000 0 0 2000 1E+30Non Negative Model 102 1000 0 0 1000 1E+30 Section 1: Group 2: PAAATH 4/8/2012 6
  7. 7. Shadow price of Engine Assembly is 2000 $So if Assembly unit capacity is increased from 4000 to 4001 thenExtra unit Engine Assembly capacity is worth 2000$ Variables Model 101 Model 102 Objective 1999 1001 2402000 Section 1: Group 2: PAAATH 4/8/2012 7
  8. 8. If capacity of Engine Assembly is increased to 4100Increase in profit due to 100 unit increase in production capacity =2600000-2400000 =200000 Variables Model 101 Model 102 Objective 1900 1100 2600000 Section 1: Group 2: PAAATH 4/8/2012 8
  9. 9. 500 Units of Engine Assembly capacity can be added before it capacityworth changes.Profit at 4500 & 4501 is same i.e. production decision does not change Objective 3400000 Variables Model 101 Model 102 1500 1500 Section 1: Group 2: PAAATH 4/8/2012 9
  10. 10. Max We can have 500 Hr increase in capacity and profit ContributionIncrease 2000$ per hrSo max we can pay that much Variables Model 101 Model 102 Objective 1500 1500 3400000 Section 1: Group 2: PAAATH 4/8/2012 10
  11. 11. ConstraintsEngine Assembly 1 2 0.8 4000 <= 4000Metal Stamping 2 2 1.5 6000 <= 6000Model 101 assembly 2 0 1 4000 <= 5000Model 102 assembly 0 3 0 3000 <= 4500Non Negative Model 101 1 0 0 2000 >= 0Non Negative Model 102 0 1 0 1000 >= 0Non Negative Model 103 0 0 1 0 >= 0 Profit= UCM Model 101*units Model 101+ UCM Model 102*units Model 102+ UCM Model 103*units Model 103 - Fixed overheads Section 1: Group 2: PAAATH 4/8/2012 11
  12. 12. We should not produce Model103 Variables Model 101 Model 102 Model103 Objective 2000 1000 0 2400000 Section 1: Group 2: PAAATH 4/8/2012 12
  13. 13. Final Reduced Objective Allowable Allowable Name Value Cost Coefficient Increase DecreaseModel 101 2000 0 3000 2000 500Model 102 1000 0 5000 1000 2000Model103 0 0 2000 350 1E+30 Final Shadow Constraint Allowable Allowable Name Value Price R.H. Side Increase DecreaseEngine Assembly 4000 2000 4000 500 500Metal Stamping 6000 500 6000 500 1000Model 101 assembly 4000 0 5000 1E+30 1000Model 102 assembly 3000 0 4500 1E+30 1500Non Negative Model 101 2000 0 0 2000 1E+30Non Negative Model 102 1000 0 0 1000 1E+30Non Negative Model 103 0 -350 0 2857.142857 0 Section 1: Group 2: PAAATH 4/8/2012 13
  14. 14. Model 103 CM should be more than > 2350 in order to make it worthyof productionWith 2351 CM for Model 103 we get the following production schedule Variables Model 101 Model 102 Model103 Objective 0 857.14286 2857.1429 2402857 Section 1: Group 2: PAAATH 4/8/2012 14
  15. 15. Clearly from sensitivity analysis 500 Units of Engine Assembly capacity can beadded. More than that will make no improvement Variables Model 101 Model 102 Objective 2000 1000 2400000 Section 1: Group 2: PAAATH 4/8/2012 15
  16. 16. ConstraintsEngine Assembly 1 2 4500 <= 6000Metal Stamping 2 2 6000 <= 6000Model 101 assembly 2 0 3000 <= 5000Model 102 assembly 0 3 4500 <= 4500Non Negative Model 101 1 0 1500 >= 0Non Negative Model 102 0 1 1500 >= 0 Section 1: Group 2: PAAATH 4/8/2012 16
  17. 17. So Additional revenue =-50000$ VariablesModel 101 Model 102 Objective 1500 1500 3400000New Contribution 3400000Increase in fixed cost 750000Increase in labour 250*3600$ 900000labour Cost saving 500*1200$ 600000Net Contribution 2350000 Section 1: Group 2: PAAATH 4/8/2012 17
  18. 18. We have to add new constraint of product mix Constraints Engine Assembly 1 2 <= 4000 Metal Stamping 2 2 <= 6000 Model 101 assembly 2 0 <= 5000 Model 102 assembly 0 3 <= 4500 Non Negative Model 101 1 0 >= 0 Non Negative Model 102 0 1 >= 0 Product ratio Constraint -1 3 = 0 Section 1: Group 2: PAAATH 4/8/2012 18
  19. 19. Additional Contribution Due to this decision is =2400000$ - 1900000$ =500000$ Variables Model 101 Model 102 Objective 2250 750 1900000 Section 1: Group 2: PAAATH 4/8/2012 19
  20. 20. Section 1: Group 2: PAAATH 4/8/2012 20

×