Consider the Big M Co. problem presented in Section 3.5, including the spreadsheet in Figure 3.10 showing its formulation and optimal solution.

There is some uncertainty about what the unit costs will be for shipping through the various shipping lanes. Therefore, before adopting the optimal solution in Figure 3.10, management wants additional information about the effect of inaccuracies in estimating these unit costs.

Use Solver to generate the sensitivity report preparatory to addressing the following questions.

a. Which of the unit shipping costs given in Table 3.9 has the smallest margin for error without invalidating the optimal solution given in Figure 3.10? Where should the greatest effort be placed in estimating the unit shipping costs?

TABLE 3.9 Some Data for the Big M Company Distribution- Network Problem

FIGURE 5.10
The revised Wyndor problem where the estimates of the unit profits for doors and windows have been changed to PD 5 $450 and PW 5 $400, respectively, but no change occurs in the optimal solution.

b. What is the allowable range for each of the unit shipping costs?
c. How should the allowable range be interpreted to management?
d. If the estimates change for more than one of the unit shipping costs, how can you use the sensitivity report to determine whether the optimal solution might change?

Transcribed Image Text:

Shipping Cost for Each Lathe Customer 2 Customer 1 To Customer 3 Output From $700 $800 700 Factory 1 Factory 2 Order size $900 12 lathes 15 lathes 800 10 lathes 900 8 lathes 9 lathes Wyndor Glass Co. Product-Mix Problem Doors Windows Unit Profit $450 $400 Hours Hours Hours Used per Unit Produced Used Available Plant 1 2. 4 Plant 2 2 12 12 Plant 3 3 18 18 10 11 Doors Windows Total Profit 12 Units Produced 6. $3,300 2.