In the original formulation, which constraints were binding?
So far, we have determined the optimal production plan that should be used on a daily basis. If needed, attach Exhibit A with supporting information to back up your answers.
To grow her business in the long run, Imelda is considering two options:
Option A: She can hire 40 more units of labor daily at the cost of $4.50 per unit.
Option B: She can invest in technology and increase the daily total capacity by 50 pairs of shoes. This investment has a one-time cost of $50,000. Applying a straight line amortization schedule over one year (250 working days), Imelda finds the daily cost of this investment to be $200.
Which option is better?
Under Option A:
Net impact =
Change in production:
Under Option B:
Net impact =
Change in production:
Consequently, Option _____ is better.
Suppose labor costs $5 per unit and the new technology has to be amortized over 6 months. What should Imelda do?
Ignoring part (c), use SolverTable to discuss the effects of extending labor on the Objective function. Include a well-formatted table as Exhibit B. What would be your recommendation to Imelda?
Imelda does not want more than 40% of the produced shoes to be casual shoes. Write down this constraint, so that the resulting model is still linear.
What can you say about the effect of adding the constraint in (e) on the objective function (without rerunning Solver)?