You manage a production line that operates using a monthly production cycle. There are five different...

You manage a production line that operates using a monthly production cycle. There are five different products that could be made this month. However, you only have 500 hours of line capacity, so you must be careful which products you select to make in the production cycle.

Making a product incurs two types of setup costs: (1) a material “tear down” cost (measured in dollars) and (2) downtime for line preparation (measured in hours). Any quantity up to the forecasted monthly demand can be sold. Additional production details are given in the table below:

	Product 1	Product 2	Product 3	Product 4	Product 5
Monthly Demand	1000 units	1100 units	1700 units	1600 units	1500 units
Revenue (per unit)	$150	$175	$155	$200	$225
Production Cost (per unit)	$60	$70	$60	$100	$110
Set Up Cost	$10000	$15000	$25000	$10000	$5000
Set Up Time	25 hrs	15 hrs	0 hrs	10 hrs	30 hrs
Production Time (per unit)	.1 hrs	.12 hrs	.13 hrs	.15 hrs	.16 hrs

Based on this information, design a monthly production schedule to maximize monthly profit. Your solution should identify which products to make and the quantities of each. (Assume the line is not currently set up to make any of these products; Set Optimality Gap to .1%)
If you could go to a two-month production cycle with the same monthly demands and the same monthly capacity, would you select different products and quantities? (Again assume the line is not currently set up to make any of these products; Set Optimality Gap to .1%)

Expert Solution

for two month production cycle, set up cost is applied once and hence the difference is there

in one month cycle, product 4 and 5 are abondoned to reach the maximum profit of $277885 with the time constraint of 500 hrs in a month

however in two months production cycle, only product 4 is abondoned to reach the maximum profit of $679063 with the constraint of 1000 hrs and one time set up cost

ekkarill92 answered 5 months ago

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