Frandec Company manufactures, assembles, and rebuilds material handling equipment used in warehouses and distribution centers. One product, called a Liftmaster, is assembled from four components: a frame, a motor, two supports, and a metal strap. Frandec’s production schedule calls for 5000 Liftmasters to be made next month. Frandec purchases the motors from an out- side supplier, but the frames, supports, and straps may be either manufactured by the company or purchased from an outside supplier. Manufacturing and purchase costs per unit are shown.
Component Manufacturing Cost Purchase Cost
Frame $38.00 $51.00
Support $11.50 $15.00
Strap $6.50 $7.50
Three departments are involved in the production of these components. The time (in min- utes per unit) required to process each component in each department and the available capacity (in hours) for the three departments are as follows:
Department
Component Cutting Milling Shaping
Frame 3.5 2.2 3.1
Support 1.3 1.7 2.6
Strap 0.8 -- 1.7
Capacity(hours) 350 420 680
a. Formulate and solve a linear programming model for this make-or-buy application. How many of each component should be manufactured and how many should be purchased?
b. What is the total cost of the manufacturing and purchasing plan?
c. How many hours of production time are used in each department?
d. How much should Frandec be willing to pay for an additional hour of time in the shaping department?
e. Another manufacturer has offered to sell frames to Frandec for $45 each. Could Frandec improve its position by pursuing this opportunity? Why or why not?