A chemicals company produces two main products, C and B. The market price of C is 205
Question:
The market price of C is £205 and that of B is £155 per 100 kg. The resource requirements for producing 100 kg of each of the two products are:
Cost of Process 1 Process 2
Materials Labor Labor
£ Hours Hours
C 75 4 5
B 60 5 2.5
Labor in Process 1 costs £9 per hour. Labor in Process 2 costs £12 per hour. During the coming period the company will have the following resources available:
Process 1 3,000 hours
Process 2 2,500 hours
C is a long established product where demand has been reducing over the years. The company expects the demand on this product to be limited to 15,000 kg this year.
Required
A solution to the linear programmed is given below:
S1,S2 and S3 are slack variables for Process 1 and Process 2 and the maximum demand for Product C, respectively.
Final Tableau
C B S1 S2 S3 Solution
B 0 1 0.2 0 -0.8 480
S2 0 0 -0.5 1 -3 550
C 1 0 0 0 1 150
Z 0 0 4 0 18 14,700
1) Interpret the information given in the tableau above and show that it would be worthwhile paying the labour in Process 1 for overtime working at £11.00 per hour
(6 marks)
2)Calculate how many extra hours in Process 1 could be worked on overtime before another binding constraint is created and calculate the extra contribution this would make.
(2 marks)
Managerial economics
ISBN: 978-1118041581
7th edition
Authors: william f. samuelson stephen g. marks