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Homework 8

1) The Porsche Club of America sponsors driver education events that provide high- performance driving instructions on actual race tracks. Because safety is a primary concern at such events, many owners elect to install roll bars on their cars. Deegan Industries manufactures two types of roll bars for Porches. Model DRB is bolted to the car using existing holes in the cars frame. Model DRW is a heavier roll bar that must be welded onto the car’s frame. Model DRB requires 20 pounds of a special high alloy steel, 40 minutes of manufacturing time, and 60 minutes of assembly time. Model DRW requires 25 pounds of the high alloy steel, 100 minutes of manufacturing time, and 40 minutes of assembly time. Deegan’s supplier indicated that at most 40,000 pounds of the high alloy steel will be available next quarter. IN addition, Deegan estimates that 2000 hours of manufacturing time and 1600 hours of assembly tie will be available next quarter. The profit contributions are $200 per unit for the DRB and $2800 per unit for the DRW. (Hint: Convert hours into minutes)

a) What is the optimal number of units to produce for the DRB and for the DRW?

b) What is the total profit that would be achieved with this production plan?

c) Deegan is considering paying overtime to increase the amount of time available for assembly. What would you advise Deegan to do regarding this option? Explain your answer.

2) The program manager for Channel 10 would like to determine the best way to allocate the time available for the 11:00 PM to 11:30 PM evening news broadcast. Specifically, she wants to determine the number of minutes of broadcast time to devote to local news, national news, weather, and sports. Over the 30- minute broadcast, 10 minutes are set aside for advertising leaving the remaining time for the news broadcast. The station is a member of a national broadcasting company that has established the following guidelines on scheduling.

1) At least 15% of the available time must be devoted to local news

2) Local or national news must make up at least 50% of the broadcast time.

3) The time devoted to weather must be less than or equal to the time devoted to sports.

4) The total time devoted to sports cannot exceed the time allocated to local and national news (view this as only 1 segment).

5) At least 20% of the time must be devoted to weather.

The cost of production for each minute is $300 for local news, $200 for national news, $100 for weather, and $100 for sports. (Hint: don’t forget all the available time must be used)

The variables used in this problem are: L for local news, N for national news, W for weather, and S for sports.

a) How much time should be allocated to local news? How much time allocated to national news? How much time allocated to weather? How much time allocated to sports?

b) What is the minimum cost of producing the news broadcast?

c) Since there are 10 minutes of advertising in the news broadcast what is the lowest amount that the program manager must charge for one minute of advertising?

3) South Central Utilities has just announced that it will open a new nuclear power generator at its Baton Rouge, Louisiana nuclear power plant. Its personnel depart has been directed to determine how many technicians need to be hired and trained over the remainder of the year.

The plant currently employs 350 fully trained technicians and projects the following personnel needs

Month

August

September

October

November

December

Hours Needed

40,000

45,000

35,000

50,000

45,000

By Louisiana law, a reactor technician can work no more than 130 hours a month (slightly more than 1 hour per day is needed to sign in and out, review records, and undergo a health check for exposure). Policy at South Central Utilities also dictates that layoff of trained technicians is not allowed during periods of slack time. So if more technicians are available than needed in any month each worker is still paid even though they may not work the full 130 hours.

Training new workers is an important and costly procedure. It takes one month of one on one classroom instruction before a technician can be certified to operate in a nuclear facility. Therefore, South Central must hire trainees one month before they are needed in the facility. Each trainee is matched up with a trained technician and requires 90 hours of the technicians time, meaning that the trained technicians have 90 fewer hours to work in the facility that month if they are training.

Personnel department records indicate that the turnover rate of trained technicians is 5% a month due to technicians quitting, being fired, losing certification, or for health reasons. This means that in any month the number of trained technicians is the new trained technicians and only 95% of the total trained technicians of the previous month. A trained technician gets paid an average of $2,000 a month while trainees are paid an average of $900 a month while they are training.

X is the number of fully trained technicians for that month and T is the number of trainees for that month. Months are numbered August = 1, September = 2 … December = 5.

a) How many trainees must be hired each month?

b) What is the expected cost for technicians and trainees over the last five months of the year?

4) The Don Levine Corporation currently produces in four different cities: Decatur, Minneapolis, Carbondale, and St Louis. They send their product to three different warehouses named Ciro, Blue Earth, and Des Moines. The table below shows the transportation cost of shipping from their current plants to their warehouses.

To

Decatur

Minneapolis

Carbondale

St. Louis

Demand

Blue Earth

20

17

21

27

250

Ciro

25

27

20

28

200

Des Moines

22

25

22

31

350

Capacity

300

200

150

150

Their production cost per facility is shown in the table below.

Location

Decatur

Minneapolis

Carbondale

St. Louis

Production Cost

50

60

70

50

The variables are denoted using X## where the first number is the source and the second number is the destination. Sources: Decatur = 1, Minneapolis = 2, Carbondale = 3, and St. Louis = 4. Destinations: Blue Earth = 1, Ciro = 2 and Des Moines = 3.

a) Don Levine Corporation should ship how many goods from each production facility to each warehouse? What is the cost (including production costs) of this shipping plan?

b) The State of Illinois is trying to convince the Don Levine Corporation to move their production facility from St. Louis to East St. Louis. Management has determined that with the incentives that Illinois has provided that production costs would be lower in Illinois but shipping costs to Blue Earth and Ciro would be more expensive. The production cost in East St. Louis would be $40 but the transportation costs to Blue Earth would be $29, to Ciro would be $30, and to ship to Des Moines would be $30. Assume that the corporation shuts down its St. Louis plant and moves all of its production to East St. Louis, which has a capacity of 150 units. How many goods should be shipped from each production plant to each warehouse? What is the cost (including production cost) of this shipping plan? (Hint: the shipping plans are different)

In part b East St Louis is given the source number 5.

c) Given your answer to part a) and part b) should the Don Levine Corporation move its production facility to East St Louis? Explain your answer.