MBA662 HW1

Anderson & Blount (A&B) Woodworks makes tables and chairs from 30-inch wide mahogany sheets that it purchases the linear foot. It can purchase whatever mahogany it desires for $10 per linear foot up to 2250 linear feet per week. Each table requires 9 linear feet and each chair 3 linear feet (including waste). Each chair also utilizes a soft cushion. Up to 500 cushions can be purchased each week for $25 each. Other required hardware (supports, braces, nuts, bolts, etc.) averages $45 for each table and $25 for each chair. A&B sells the tables to retailers for $300 each and each chair for $150 each.

The 10 craftsmen employed by A&B are salaried workers. Their wages of $800 each per week as well as the $5000 per week in rent, insurance and utility costs are all considered fixed costs. To produce a table requires 1 hour of a craftsmen’s time, whereas each chair requires only 36 minutes. Each craftsman averages 37.5 productive work-hours per week. Company policy mandates that the ratio of chairs to tables must be between 4 to 1 and 6 to 1.

a. Develop a linear programming model for A&B. The objective function should maximize its gross weekly profit (gross revenue less the variable costs of wood, cushions and other materials). Express the feasible region by the non-negativity constraints and a set of five functional constraints (wood and cushion availability, the minimum and maximum chair to table ratios, and the maximum weekly production time).

b. Apply graphical analysis to draw (to scale) each constraint and identify the resulting feasible region.

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Continuing from HW1 on A&B Woodworks and given the correct formulation in HW1 solution.

a) Use the method of line of same profit to find the optimal solution graphically.

b) Use Excel Solver to produce the optimal solution and sensitivity report, Copy a screenshot of the sensitivity report in your HW, and answer the following questions.

1- What is the optimal gross weekly profit?

2- 2. What is the optimal net weekly profit (gross weekly profit less the fixed labor, rent, insurance and utility costs)?

3- 3. Determine and interpret the shadow prices for: i. linear feet of mahogany ii. cushions iii. production hours