Based on the following sensitivity report, what would be the impact of changing the constraint right-hand side for Resource_A to 75 and, at the same time, changing the constraint right-hand side for Resource_C to 590? Variable CellsCellNameFinal ValueReduced Cost Objective CoefficientAllowableIncreaseAllowableDecrease$B$2Product_10−2521E+30$B$3Product_2175071E+301$B$4Product_30−1.591.51E+30ConstraintsCellNameFinal ValueShadow Price Constraint R.H.SideAllowableIncreaseAllowableDecrease$H$9Resource_A001001E+3080$H$10Resource_B52508001E+30270$H$11Resource_C7001.75700320180 Applying the 100% rule, _______________ because the total change in the contraint right-hand sides __________ 100%

With the given report, We can see the shadow prices and allowable increase, decrease ranges for the…

Business

Operations Management

Applying the 100% rule, _______________ because the total change in the contraint right-hand sides __________ 100%

Applying the 100% rule, _____ because the total change in the contraint right-hand sides 100%

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter5: Network Models

Section: Chapter Questions

Problem 67P

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When you use a RISKSIMTABLE function for a decision variable, such as the order quantity in the Walton model, explain how this provides a fair comparison across the different values tested.
The Pigskin Company produces footballs. Pigskin must decide how many footballs to produce each month. The company has decided to use a six-month planning horizon. The forecasted monthly demands for the next six months are 10,000, 15,000, 30,000, 35,000, 25,000, and 10,000. Pigskin wants to meet these demands on time, knowing that it currently has 5000 footballs in inventory and that it can use a given months production to help meet the demand for that month. (For simplicity, we assume that production occurs during the month, and demand occurs at the end of the month.) During each month there is enough production capacity to produce up to 30,000 footballs, and there is enough storage capacity to store up to 10,000 footballs at the end of the month, after demand has occurred. The forecasted production costs per football for the next six months are 12.50, 12.55, 12.70, 12.80, 12.85, and 12.95, respectively. The holding cost incurred per football held in inventory at the end of any month is 5% of the production cost for that month. (This cost includes the cost of storage and also the cost of money tied up in inventory.) The selling price for footballs is not considered relevant to the production decision because Pigskin will satisfy all customer demand exactly when it occursat whatever the selling price is. Therefore. Pigskin wants to determine the production schedule that minimizes the total production and holding costs. Can you guess the results of a sensitivity analysis on the initial inventory in the Pigskin model? See if your guess is correct by using SolverTable and allowing the initial inventory to vary from 0 to 10,000 in increments of 1000. Keep track of the values in the decision variable cells and the objective cell.
The Pigskin Company produces footballs. Pigskin must decide how many footballs to produce each month. The company has decided to use a six-month planning horizon. The forecasted monthly demands for the next six months are 10,000, 15,000, 30,000, 35,000, 25,000, and 10,000. Pigskin wants to meet these demands on time, knowing that it currently has 5000 footballs in inventory and that it can use a given months production to help meet the demand for that month. (For simplicity, we assume that production occurs during the month, and demand occurs at the end of the month.) During each month there is enough production capacity to produce up to 30,000 footballs, and there is enough storage capacity to store up to 10,000 footballs at the end of the month, after demand has occurred. The forecasted production costs per football for the next six months are 12.50, 12.55, 12.70, 12.80, 12.85, and 12.95, respectively. The holding cost incurred per football held in inventory at the end of any month is 5% of the production cost for that month. (This cost includes the cost of storage and also the cost of money tied up in inventory.) The selling price for footballs is not considered relevant to the production decision because Pigskin will satisfy all customer demand exactly when it occursat whatever the selling price is. Therefore. Pigskin wants to determine the production schedule that minimizes the total production and holding costs. As indicated by the algebraic formulation of the Pigskin model, there is no real need to calculate inventory on hand after production and constrain it to be greater than or equal to demand. An alternative is to calculate ending inventory directly and constrain it to be nonnegative. Modify the current spreadsheet model to do this. (Delete rows 16 and 17, and calculate ending inventory appropriately. Then add an explicit non-negativity constraint on ending inventory.)
The Pigskin Company produces footballs. Pigskin must decide how many footballs to produce each month. The company has decided to use a six-month planning horizon. The forecasted monthly demands for the next six months are 10,000, 15,000, 30,000, 35,000, 25,000, and 10,000. Pigskin wants to meet these demands on time, knowing that it currently has 5000 footballs in inventory and that it can use a given months production to help meet the demand for that month. (For simplicity, we assume that production occurs during the month, and demand occurs at the end of the month.) During each month there is enough production capacity to produce up to 30,000 footballs, and there is enough storage capacity to store up to 10,000 footballs at the end of the month, after demand has occurred. The forecasted production costs per football for the next six months are 12.50, 12.55, 12.70, 12.80, 12.85, and 12.95, respectively. The holding cost incurred per football held in inventory at the end of any month is 5% of the production cost for that month. (This cost includes the cost of storage and also the cost of money tied up in inventory.) The selling price for footballs is not considered relevant to the production decision because Pigskin will satisfy all customer demand exactly when it occursat whatever the selling price is. Therefore. Pigskin wants to determine the production schedule that minimizes the total production and holding costs. Modify the Pigskin model so that there are eight months in the planning horizon. You can make up reasonable values for any extra required data. Dont forget to modify range names. Then modify the model again so that there are only four months in the planning horizon. Do either of these modifications change the optima] production quantity in month 1?
The eTech Company is a fairly recent entry in the electronic device area. The company competes with Apple. Samsung, and other well-known companies in the manufacturing and sales of personal handheld devices. Although eTech recognizes that it is a niche player and will likely remain so in the foreseeable future, it is trying to increase its current small market share in this huge competitive market. Jim Simons, VP of Production, and Catherine Dolans, VP of Marketing, have been discussing the possible addition of a new product to the companys current (rather limited) product line. The tentative name for this new product is ePlayerX. Jim and Catherine agree that the ePlayerX, which will feature a sleeker design and more memory, is necessary to compete successfully with the big boys, but they are also worried that the ePlayerX could cannibalize sales of their existing productsand that it could even detract from their bottom line. They must eventually decide how much to spend to develop and manufacture the ePlayerX and how aggressively to market it. Depending on these decisions, they must forecast demand for the ePlayerX, as well as sales for their existing products. They also realize that Apple. Samsung, and the other big players are not standing still. These competitors could introduce their own new products, which could have very negative effects on demand for the ePlayerX. The expected timeline for the ePlayerX is that development will take no more than a year to complete and that the product will be introduced in the market a year from now. Jim and Catherine are aware that there are lots of decisions to make and lots of uncertainties involved, but they need to start somewhere. To this end. Jim and Catherine have decided to base their decisions on a planning horizon of four years, including the development year. They realize that the personal handheld device market is very fluid, with updates to existing products occurring almost continuously. However, they believe they can include such considerations into their cost, revenue, and demand estimates, and that a four-year planning horizon makes sense. In addition, they have identified the following problem parameters. (In this first pass, all distinctions are binary: low-end or high-end, small-effect or large-effect, and so on.) In the absence of cannibalization, the sales of existing eTech products are expected to produce year I net revenues of 10 million, and the forecast of the annual increase in net revenues is 2%. The ePIayerX will be developed as either a low-end or a high-end product, with corresponding fixed development costs (1.5 million or 2.5 million), variable manufacturing costs ( 100 or 200). and selling prices (150 or 300). The fixed development cost is incurred now, at the beginning of year I, and the variable cost and selling price are assumed to remain constant throughout the planning horizon. The new product will be marketed either mildly aggressively or very aggressively, with corresponding costs. The costs of a mildly aggressive marketing campaign are 1.5 million in year 1 and 0.5 million annually in years 2 to 4. For a very aggressive campaign, these costs increase to 3.5 million and 1.5 million, respectively. (These marketing costs are not part of the variable cost mentioned in the previous bullet; they are separate.) Depending on whether the ePlayerX is a low-end or high-end produce the level of the ePlayerXs cannibalization rate of existing eTech products will be either low (10%) or high (20%). Each cannibalization rate affects only sales of existing products in years 2 to 4, not year I sales. For example, if the cannibalization rate is 10%, then sales of existing products in each of years 2 to 4 will be 10% below their projected values without cannibalization. A base case forecast of demand for the ePlayerX is that in its first year on the market, year 2, demand will be for 100,000 units, and then demand will increase by 5% annually in years 3 and 4. This base forecast is based on a low-end version of the ePlayerX and mildly aggressive marketing. It will be adjusted for a high-end will product, aggressive marketing, and competitor behavior. The adjustments with no competing product appear in Table 2.3. The adjustments with a competing product appear in Table 2.4. Each adjustment is to demand for the ePlayerX in each of years 2 to 4. For example, if the adjustment is 10%, then demand in each of years 2 to 4 will be 10% lower than it would have been in the base case. Demand and units sold are the samethat is, eTech will produce exactly what its customers demand so that no inventory or backorders will occur. Table 2.3 Demand Adjustments When No Competing Product Is Introduced Table 2.4 Demand Adjustments When a Competing Product Is Introduced Because Jim and Catherine are approaching the day when they will be sharing their plans with other company executives, they have asked you to prepare an Excel spreadsheet model that will answer the many what-if questions they expect to be asked. Specifically, they have asked you to do the following: You should enter all of the given data in an inputs section with clear labeling and appropriate number formatting. If you believe that any explanations are required, you can enter them in text boxes or cell comments. In this section and in the rest of the model, all monetary values (other than the variable cost and the selling price) should be expressed in millions of dollars, and all demands for the ePlayerX should be expressed in thousands of units. You should have a scenario section that contains a 0/1 variable for each of the binary options discussed here. For example, one of these should be 0 if the low-end product is chosen and it should be 1 if the high-end product is chosen. You should have a parameters section that contains the values of the various parameters listed in the case, depending on the values of the 0/1 variables in the previous bullet For example, the fixed development cost will be 1.5 million or 2.5 million depending on whether the 0/1 variable in the previous bullet is 0 or 1, and this can be calculated with a simple IF formula. You can decide how to implement the IF logic for the various parameters. You should have a cash flows section that calculates the annual cash flows for the four-year period. These cash flows include the net revenues from existing products, the marketing costs for ePlayerX, and the net revenues for sales of ePlayerX (To calculate these latter values, it will help to have a row for annual units sold of ePlayerX.) The cash flows should also include depreciation on the fixed development cost, calculated on a straight-line four-year basis (that is. 25% of the cost in each of the four years). Then, these annual revenues/costs should be summed for each year to get net cash flow before taxes, taxes should be calculated using a 32% tax rate, and taxes should be subtracted and depreciation should be added back in to get net cash flows after taxes. (The point is that depreciation is first subtracted, because it is not taxed, but then it is added back in after taxes have been calculated.) You should calculate the company's NPV for the four-year horizon using a discount rate of 10%. You can assume that the fixed development cost is incurred now. so that it is not discounted, and that all other costs and revenues are incurred at the ends of the respective years. You should accompany all of this with a line chart with three series: annual net revenues from existing products; annual marketing costs for ePlayerX; and annual net revenues from sales of ePlayerX. Once all of this is completed. Jim and Catherine will have a powerful tool for presentation purposes. By adjusting the 0/1 scenario variables, their audience will be able to see immediately, both numerically and graphically, the financial consequences of various scenarios.
Based on Grossman and Hart (1983). A salesperson for Fuller Brush has three options: (1) quit, (2) put forth a low level of effort, or (3) put forth a high level of effort. Suppose for simplicity that each salesperson will sell 0, 5000, or 50,000 worth of brushes. The probability of each sales amount depends on the effort level as described in the file P07_71.xlsx. If a salesperson is paid w dollars, he or she regards this as a benefit of w1/2 units. In addition, low effort costs the salesperson 0 benefit units, whereas high effort costs 50 benefit units. If a salesperson were to quit Fuller and work elsewhere, he or she could earn a benefit of 20 units. Fuller wants all salespeople to put forth a high level of effort. The question is how to minimize the cost of encouraging them to do so. The company cannot observe the level of effort put forth by a salesperson, but it can observe the size of his or her sales. Thus, the wage paid to the salesperson is completely determined by the size of the sale. This means that Fuller must determine w0, the wage paid for sales of 0; w5000, the wage paid for sales of 5000; and w50,000, the wage paid for sales of 50,000. These wages must be set so that the salespeople value the expected benefit from high effort more than quitting and more than low effort. Determine how to minimize the expected cost of ensuring that all salespeople put forth high effort. (This problem is an example of agency theory.)
Suppose that GLC earns a 2000 profit each time a person buys a car. We want to determine how the expected profit earned from a customer depends on the quality of GLCs cars. We assume a typical customer will purchase 10 cars during her lifetime. She will purchase a car now (year 1) and then purchase a car every five yearsduring year 6, year 11, and so on. For simplicity, we assume that Hundo is GLCs only competitor. We also assume that if the consumer is satisfied with the car she purchases, she will buy her next car from the same company, but if she is not satisfied, she will buy her next car from the other company. Hundo produces cars that satisfy 80% of its customers. Currently, GLC produces cars that also satisfy 80% of its customers. Consider a customer whose first car is a GLC car. If profits are discounted at 10% annually, use simulation to estimate the value of this customer to GLC. Also estimate the value of a customer to GLC if it can raise its customer satisfaction rating to 85%, to 90%, or to 95%. You can interpret the satisfaction value as the probability that a customer will not switch companies.
An automobile manufacturer is considering whether to introduce a new model called the Racer. The profitability of the Racer depends on the following factors: The fixed cost of developing the Racer is triangularly distributed with parameters 3, 4, and 5, all in billions. Year 1 sales are normally distributed with mean 200,000 and standard deviation 50,000. Year 2 sales are normally distributed with mean equal to actual year 1 sales and standard deviation 50,000. Year 3 sales are normally distributed with mean equal to actual year 2 sales and standard deviation 50,000. The selling price in year 1 is 25,000. The year 2 selling price will be 1.05[year 1 price + 50 (% diff1)] where % diff1 is the number of percentage points by which actual year 1 sales differ from expected year 1 sales. The 1.05 factor accounts for inflation. For example, if the year 1 sales figure is 180,000, which is 10 percentage points below the expected year 1 sales, then the year 2 price will be 1.05[25,000 + 50( 10)] = 25,725. Similarly, the year 3 price will be 1.05[year 2 price + 50(% diff2)] where % diff2 is the percentage by which actual year 2 sales differ from expected year 2 sales. The variable cost in year 1 is triangularly distributed with parameters 10,000, 12,000, and 15,000, and it is assumed to increase by 5% each year. Your goal is to estimate the NPV of the new car during its first three years. Assume that the company is able to produce exactly as many cars as it can sell. Also, assume that cash flows are discounted at 10%. Simulate 1000 trials to estimate the mean and standard deviation of the NPV for the first three years of sales. Also, determine an interval such that you are 95% certain that the NPV of the Racer during its first three years of operation will be within this interval.

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Practical Management Science

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9781337406659

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WINSTON, Wayne L.

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Cengage,

Practical Management Science

Operations Management

ISBN:

9781337406659

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Cell	Name	Final Value	Reduced Cost	Objective Coefficient	Allowable Increase	Allowable Decrease
$B$2	Product_1	0	−2	5	2	1E+30
$B$3	Product_2	175	0	7	1E+30	1
$B$4	Product_3	0	−1.5	9	1.5	1E+30

Cell	Name	Final Value	Shadow Price	Constraint R.H.Side	Allowable Increase	Allowable Decrease
$H$9	Resource_A	0	0	100	1E+30	80
$H$10	Resource_B	525	0	800	1E+30	270
$H$11	Resource_C	700	1.75	700	320	180