What is the opportunity cost associated with product

Assignment Help Operation Management

Reference no: EM131292324 , Length: 2

Install and launch the POM-QM for Windows software. From the main menu, select Module and then Linear Programming.

Program the linear programming formulation for the problem below and solve it with the use of POM. Refer to Appendix IV from the Heizer and Render (2014) textbook.

Note: Do not program the non-negativity constraint, as this is already assumed by the software.

For additional support, please reference the POM-QM for Windows manual available from the ‘Help' menu in the POM-QM Windows software.

Individual Project, part 1

A firm uses three machines in the manufacturing of three products:

- Each unit of product 1 requires three hours on machine 1, two hours on machine 2 and one hour on machine 3.

- Each unit of product 2 requires four hours on machine 1, one hour on machine 2 and three hours on machine 3.

- Each unit of product 3 requires two hours on machine 1, two hours on machine 2 and two hours on machine 3.

The contribution margin of the three products is £30, £40 and £35 per unit, respectively.

The following are available for scheduling:
- 90 hours of machine 1 time
- 54 hours of machine 2 time
- 93 hours of machine 3 time

The linear programming formulation of this problem is as follows:

Maximise Z = 30X₁ + 40X₂ + 35X₃

3X₁ + 4X₂ + 2X₃<= 90

2X₁ + 1X₂ + 2X₃<=54

X₁ + 3X₂ + 2X₃<=93

With X₁, X₂, X₃>= 0

To answer this question:

Answer each question and explain your reasoning or show your calculations.

1. What is the optimal production schedule for this firm? What is the profit contribution of each of these products?

2. What is the marginal value of an additional hour of time on machine 1? Over what range of time is this marginal value valid?

3. What is the opportunity cost associated with product 1? What interpretation should be given to this opportunity cost?

4. How many hours are used for machine 3 with the optimal solution?

5. How much can the contribution margin for product 2 change before the current optimal solution is no longer optimal?

Individual Project, part 2

For this part of this project, you will need to use the POM software:

1. Review the linear programming section from the POM manual:

Weiss, H.J. (2013) POM-QM for Windows manual. Upper Saddle River, NJ: Prentice Hall. Available from the ‘Help' menu in the POM-QM Windows software.

You may also wish to research and review online tutorials regarding the linear programming module.

2. Program the project management problem below and solve it with the use of POM. Select Project Management(PERT/CPM) module, and then select the option File->New->Mean, Stddev given items.

Activity	Mean duration	Std. dev. (days)
A	11	0.9
B	13	1.1
C	7	0.2
D	9	0.8
E	6	1
F	7	1.2
G	10	0.7
H	9	0.6
I	8	0.8

Table 1: Activity, duration and standard deviation

To answer this question:

Answer each question and explain your reasoning or show your calculations.

1. Calculate the project completion time.

2. Indicate the critical path activities.

3. What is the probability of completing this project between 38 and 40 days?

4. What are the slack values for activities C and F? Interpret the meaning of their slack values.

Reference no: EM131292324

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