# Question: Reconsider Prob 7 3 4 After further negotiations with each vendor management

Reconsider Prob. 7.3-4. After further negotiations with each vendor, management of the G.A. Tanner Co. has learned that either of them would be willing to consider increasing their supply of their respective subassemblies over the previously stated maxima (3,000 subassemblies of type A per day and 1,000 of type B per day) if the company would pay a small premium over the regular price for the extra subassemblies. The size of the premium for each type of subassembly remains to be negotiated. The demand for the toy being produced is sufficiently high so that 2,500 per day could be sold if the supply of subassemblies could be increased enough to support this production rate. Assume that the original estimates of unit profits given in Prob. 7.3-4 are accurate.
(a) Formulate and solve a spreadsheet model for this problem with the original maximum supply levels and the additional constraint that no more than 2,500 toys should be produced per day.
(b) Without considering the premium, use the spreadsheet and Solver to determine the shadow price for the subassembly A constraint by solving the model again after increasing the maximum supply by 1. Use this shadow price to determine the maximum premium that the company should be willing to pay for each subassembly of this type.
(c) Repeat part (b) for the subassembly B constraint.

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