Reference no: EM131704057

Assignment 1

Part I - Using Linear Programing to solve Make or Buy problem.

The Carson Stapler Manufacturing Company forecasts a 5000-unit demand for its Sure-Hold model during the next quarter. This stapler is assembled from three major components: base, staple cartridges, and handle. Until now Carson has manufactured all three components. However, the forecast of 5000 units is a new high in sales volume, and it is doubtful that the firm will have sufficient production capacity to make all the components. The company is considering contracting a local firm to produce at least some of the components. The production time requirements per unit are as follows:

	Production Time (hours)
Department	Base	Cartridge	Handle	Time Available (hours)
A	0.03	0.02	0.05	400
B	0.04	0.02	0.04	400
C	0.02	0.03	0.01	400

After considering the firm's overhead, material, and labor costs, the accounting department has determined the unit manufacturing cost for each component. These data, along with the purchase price quotations by the contracting firm, are as follows:

Component	Manufacturing Cost	Purchase Cost
Base	$0.75	$0.95
Cartridge	$0.40	$0.55
Handle	$1.10	$1.40

Determine the make-or-buy decision for Carson that will meet the 5000-unit demand at a minimum total cost. How many units of each component should be made, and how many purchased? Please clearly define the decision variables, objective function, and constraints in your Word Document submission; and show the optimal answer in Excel submission. 

Part II - Short Answer Questions.

The following questions pertain to the discussions on the Case Study 1"Marshall Insurance Company".

1. From Marshall Insurance Company's perspective, what are the advantages of outsourcing?

2. What conditions would you place on Gilmore if you were to proceed with outsourcing?