However, the president did not consider that fixed overhead OH was being allocated across all units, and the discontinuation of Model would increase the overhead applied to Model Once the data had been entered, the Solver function was run.
Linear programming LP is beneficial because it assists in decision making when resource allocation is involved. This is a phenomenon known as the death spiral, when the discontinuation of a seemingly unprofitable product causes otherwise profitable products to become unprofitable.
What if Model is using defective parts and the line becomes halted. The values for contribution margin CM are given as well as the portion of departmental capacity required to produce I was able to calculate this figure using the data provided from Tables B and C in your report.
Renting Additional Capacity In addition to providing the optimal product mix, Solver has a number of other capabilities that help support my recommendations. Merton Truck Company Linear programming techniques can be used to not only determine the best production mix, but also to provide clues and data suggesting ways to improve profits.
As seen in Exhibit 8, Solver has determined that overtime should be utilized to produce additional units of Model The maximum number of hours of capacity that should be rented is Due to the demand levels and the available resources, Merton Truck Company may need to adjust the capacity limits, which would ultimately change the optimal product, mix and maximized monthly contribution.
The value of linear programming techniques in evaluating possible solutions is clear, particularly in that it quickly provides clues of other options to consider such as adding additional Engine Assembly Capacity. It can be reasonably estimated that labor hours per vehicle will be reduced due to learning curves which result from staff experience and familiarity with the production processand that Merton will therefore be able to increase the total volume of vehicles produced.
It is a must. If it is much greater, Merton should consider raising its prices to reduce demand. I then added the variable overhead costs per unit that were listed in Table C. There are several other options that Merton did not consider.
The Model trucks do not seem to be making a profit. As the Model and life cycle continues, the company should see a reduction in time and costs associated ith every aspect of the truck manufacturing process as a result of learning curves.
If both are modified, the shadow prices may no longer hold true.
Merton Truck Company provided the data used in the analysis. The following information in the memo includes the product mix of Model trucks and Model trucks that maximizes monthly contribution.
Secondly, the company should rent additional capacity from an outside supplier.
In the optimal solution, there are limitations in both Engine Assembly and Metal Stamping. In addition, technologies can help reduce the costs of designing, developing, and manufacturing a product which can help the firm to improve product quality and to charge a higher price.
Capacity Options Given the capacity limitations seen thus far, it is a fair conclusion that increasing capacity may present an opportunity.
Furthermore, linear programming is only useful in solving linear scenarios. Since it was the specific request of the president, the impact of discontinuing Model was evaluated.
The engine assembly capacity can be increased up to machine-hours. Also, only one variable or department can be increased. The use of Solver has once again proven beneficial. Note that for each, this is only true for units before the scenario would require reevaluation see the allowable increase in Exhibit 7.
The metal stamping capacity can also be increased up to an additional machine-hours. Therefore, Merton should not assemble engines on overtime under these conditions.
The method used to analyze the data was Linear Programming LP. Due to our number of constraints, using a linear program will compute exact outputs that will save time and eliminate the risk of human error.
M in monthly fixed overhead exists regardless of the product mix and does not need to be allocated on a per unit basis to determine overall profit or financial performance.
Based on the information provided here, further recommendations for Merton would be to 1 immediately change the production mix to Model s and Model s, 2 evaluate anticipated demand and the impact of a capital investment to increase capacity, and 3 seek quotes for capacity rental or outsourcing Engine Assembly.
Assuming the equipment can handle additional hours of production time, the company would be able to increase their capacity limits for both the engine assembly department and metal stamping department.
Capacity Options Given the capacity limitations seen thus far, it is a fair conclusion that increasing capacity may present an opportunity. However, fixed OH has not been included in the calculations until afterwards as it does not impact the optimal solution, only the net profit.
These limits and requirements were used to set the constraints that were used in the calculations to find the optimal product mix.
Merton should also consider the impact that learning curves and technology may have on their production process. View Notes - Merton Truck Company from STRATEGY Om at Harvard University.
Microsoft Excel Answer Report Worksheet: [Merton Truck stylehairmakeupms.com]Sheet1 Report Created: Target86%(14). Merton Truck Company Solution Road King Truck ROAD KING TRUCKS CASE ANALYSIS Capital is the source of fiancé through which resources are provided.
Merton Trucks Case Note Abstract We discuss Merton Trucks [Dhe90a] as a case to introduce linear programmingintheMBAprogram. ThiscaseadaptedfromSherman Motor Company case, was used to introduce Linear Programming formulations as well as duality. Refer to the teaching note [Dhe90b].
Merton Truck Co Case Analysis: Merton Truck Company Linear programming techniques can be used to not only determine the best production mix, but also to provide clues and data suggesting ways to improve profits. Merton Truck Co Essay. Words Apr 4th, 9 Pages. Show More.
Case Analysis: Merton Truck Company Linear programming techniques can be used to not only determine the best production mix, but also to provide clues and data suggesting ways to improve profits.
InMerton Truck Company was searching for ways to increase. Merton Truck Company Case Executive Summary The Problem: Merton Truck Company has been experiencing difficulties related to their financial performance, and they do not know which is the optimal product mix to maximize profits and performance.Merton truck solns