Case Problem: Production Strategy Managerial Report

By Debbie St. George: Student #: 1086941 MC506 Quantitative Methods for Managers - Start Date: July 1, 2003

Analyze the production problem at Better Fitness, Inc. and prepare a report for BFI's president presenting your findings and recommendations. Include (but donot limit your discussion to) a consideration of the following items: 1. The recommended number of BodyPlus 100 and BodyPlus 200 machines to produce.
Let BP100 BP200 Max s.t. 371BP100 = = + the number of BodyPlus 100 machines produced the number of BodyPlus 200 machines produced 461BP200

8BP100 5BP100 2BP100 -0.25BP100 BP100

BP200 80

+ + +
+ ,

10BP200 2BP200 .75BP200

12BP200 BP200

600 hrs of machining 450 hrs of painting and finishing time 140 hrs of assembly, testing and packaging. 0 0

Number of BodyPlus 200

70 60 50 40 30 20 10 0

Assembly, Test, and Packaging Machining and Welding BodyPlus 200 Requirement

10

20

Painting and Finishing BP100 30 40 50 60 70 80 90 100 Number of BodyPlus 100 Optimal Solution

Optimal solution: BP 100 = 50, BP 200 = 50/3 or 16.667, profit = $26,233.33. See Management Scienc

2. The effect on profits of the requirement that the number of units of the BodyPlus 200 produced must be at least 25% of the total production. If the requirement were reduced to at least 24% of total production, the new optimal solution is BP100 = 1425/28, BP200 = 225/14, with a total profit of $26,290.18; thus, total profits would increase by $56.85. In the short run the requirement reduces profits.

3. Where efforts should be expended in order to increase profits.

Retain the constraint requiring that the number of units of the BodyPlus 200 produced be at least 25% of total production. Obtain additional machining and welding time to increase profits as the current optimal solution uses the current machining and welding time.

chines to produce.

nting and finishing time

embly, testing and packaging.

3.33. See Management Science notes.

Management Science Program - LINEAR PROGRAMMING PROBLEM MAX 371BP100+461BP200 S.T. 1) 2) 3) 4) 8BP100+12BP200<600 5BP100+10BP200<450 2BP100+2BP200<140 -0.25BP100+0.75BP200>0

OPTIMAL SOLUTION Objective Function Value = Variable -------------BP100 BP200 26233.333 or $26,233.33

Value --------------50.000 16.667

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

OBJECTIVE COEFFICIENT RANGES Variable -----------BP100 BP200 Lower Limit --------------307.333 -1113.000 Current Value Upper Limit ----------------------------371.000 No Upper Limit 461.000 556.500

RIGHT HAND SIDE RANGES Constraint -----------1 2 3 4 Lower Limit Current Value Upper Limit ------------------------------------------0.000 600.000 630.000 416.667 450.000 No Upper Limit 133.333 140.000 No Upper Limit -7.500 0.000 15.000

Notes:

Department Frame machining & welding time Frame paint & finish Press machining & welding time Press paint & finish Pec-dec machining & welding time Pec-dec paint & finish Leg press machining & welding time Leg press paint & finish Assembly, testing and packaging

BP100 4 hrs 2 hrs 2 hrs 1 hr 2 hrs 2 hrs 0 hrs 0 hrs 2 hrs

Production Requirements for BP100 and BP20 Production Tim BP200 5 hrs 4 hrs 3 hrs 2 hrs 2 hrs 2 hrs 2 hrs 2 hrs 2 hrs

Production Time Requirements Totals for BP100 and BP200

Department Machining & welding time Paint & finish Assembly, testing and packaging Notes & constraints for next production period

BP100 8 hrs * $20 = $160 5 hrs * $15 = $75 2 hrs * $12 = $24 15 hrs = $259

BP200 12 hrs * $20 = $240 10 hrs * $15 = $150 2 hrs * $12 = $ 24 24 hrs = $414

8BP100 5BP100 2BP100

+ + + Suggested Price

BP100 Frame Press Pec-dec Assembly/Pack Labor

$2,400 450 300 250 50 259

$1,309 $1,091

Suggested Price
BP100 Frame Press Pec-dec Leg press Assembly/Pack Labor Max 371BP100 $3,500 650 400 250 200 75 414 +

$1,989 $1,511

ments for BP100 and BP200 Production Time

12BP200 10BP200 2BP200

600 hrs of machining 450 hrs of painting and finishing time 140 hrs of assembly, testing and packaging.

Dealers 70% Price $1,680

$1,309 $371 Profit per unit for BP100

Dealers 70% Price $2,450

$1,989 $461 Profit per unit for BP200 461BP200