Chapter 3 Sensitivity analysis Additional Questions

The questions that follow should be added to the text assignment of chapter 3. To answer these sensitivity analysis questions you need to first run the models in Excel. Solutions for these questions appear in the solution document, and can be reached from the assignment link. 2. (i) (ii) (iii) (iv) (v) Suppose the unit profit for a stove increases by 50%. What will happen to the profit? Answer without resolving the problem. If Kemper considers the allocation of overtime to enhance one production process, which process should be selected? Why? If more hours will be allocated to the stove assembly, what would be the new profit? Answer without resolving the problem if possible for the following two cases: (i) Additional 4 hours (ii) Additional 5 hours. Would the optimal production plan change if 5 hours will be taken away from the time available for the assembly of washers and dryers? Answer without resolving the problem. Would Kemper be better off adding 4 hours to the time available for the stove assembly, at the expense of reducing the time available for the molding and pressing process by one hour? Answer without resolving the problem. (Apply the 100% rule if you are familiar with it). How much should the cost of cheese be dropped before it becomes optimal to include it in Jims lunch or dinner? If Jim decides to change the maximum calories intake allowed daily to 1900, would the amount of fat consumed reduce? Why? Answer without resolving the problem. If Jim decides to spoil himself a bit more, and change the minimum calories intake required daily to 1900, what will happen to the amount of fat consumed? If Jim decides to allow a maximum of 35 grams of carbohydrate be included in his meals daily, how much fat will he consume during lunch and dinner of the day discussed? Answer without resolving the problem. Assume the changes discussed in part (iii) and (iv) above are now made simultaneously. Would the shadow prices change? If not, find the minimum amount of fat consumed at the day discussed in the problem, without resolving the problem. (Apply the 100% rule if you are familiar with it). Assume the requirement that at least $5 million are kept in a saving account is relaxed. Particularly, only $4 million at least are now required to be in the saving account. What happens to the return under this condition? Answer without re-solving the problem.

6. (i) (ii) (iii) (iv) (v)

13. (i)

(ii)

An amount of $.5 million added to the funds available for investment. What is the effect of this amount on the total return? If this money could be borrowed, what is the maximum interest rate Tritech should be willing to pay?