Production and Operations Management Essay

1725 Words Apr 17th, 2013 7 Pages
Production & Operations Management–Homework 1 for Section 4
Due Tuesday October 16, 2012 1.1 Eastman publishing Company is considering publishing a paperback textbook on spreadsheet applications for business. The fixed cost of manuscript preparation, textbook design, and production setup is estimated to be $80,000. Variable production and material costs are estimated to be $3 per book. Demand over the life of the book is estimated to be 4,000 copies. The publisher plans to sell the text to college and university bookstores for $20 each. a. What is the breakeven point? b. What profit or loss can be anticipated with a demand of 4,000 copies? c. With a demand of 4,000 copies, what is the minimum price per copy that the publisher must charge to
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What effect would this have on the optimal solution. Explain. d. If Sarah were not required to work a minimum number of hours on this project, would the optimal solution change? Explain. 1.5 National Insurance Associated carries an investment portfolio of stocks, bonds, and other investment alternatives. Currently $200,000 of funds are available and must be considered for new investment opportunities. The four stock options National is considering and the relevant financial data are as in Table 1.


Table 1: Problem 1.5 A B C D Price per share $100 $50 $80 $40 Annual rate of return 0.12 0.08 0.06 0.10 Risk measure per dollar invested 0.10 0.07 0.05 0.08

National’s top management has stipulated the following investment guidelines: The annual rate of return for the portfolio must be at least 9% and no one stock can account for more than the 50% of the total dollar investment. a. Use linear programming to develop an investment portfolio that minimizes risk. b. If the firm ignores risk and uses a maximum return-on-investment strategy, what is the investment portfolio? 1.6 Greenville Cabinet received a contract to produce speaker cabinets for a major speaker manufacturer. The contract calls for the production of 3,300 bookshelf speakers and 4,100 floor speakers over the next two months, with the delivery schedule as given in Table 2.

Table 2: Problem 1.6 Model Month 1 Month 2 Bookshelf 2,100 1,200 Floor 1,500 2,600

Greenville estimates that the
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