What factors could lead to even better level of performance: (3 points) a. For each department, what is the marginal value of additional overtime capacity? b. What is the marginal value of additional advertising dollars? c. What is the marginal value of additional sales for each product?
Hawley Lighting Company This problem was taken from Powell S.G. and Baker, R. (2007). Management Science: The Art of Modeling with Spreadsheets ed, Hoboken, N John Wiley & Sons, Inc. 280 281 The Hwy Lighting Company manufactures four types of m at factory ding teams floor lamps, celing lames, and pendant lames Table presents the weage material costs for each of the products Each product is made in one of two production proces by comments mbing and testing the product, and finally packaging it for the mod eramos through the blanding process in Department we g e nd pendant through the processins Department 2 V e r sion costs and how i t 2 The capacities are measured in its of product. Note that there were nove for each department demand for each product at the prices e Sales v e cted by advertising expenditure Starting with the demand in the increase of up to $10,000 in verg as the demand by the percentage shown in the last row. An expenditure of less than $10.000 advertising will lead to a proportiona t on demand for example, an increase in advertising $5.000 for table lamps would raise demand by 6 percento 1.800 However, there is a budget mit of $10,000 on the total amount to be went on advertising among all four products Floor Pendant Product Material.com The 6 Ceiling so Overtime Unit Cout Unit Cost $36 Capacity 100.000 90.000 Te Floor Ceiling $120 Potential sales 1000 Sheets G Charts Smar TAURUS BEREC F H O Table lamps (U) Floor lamps (F) Ceiling lamps (C) Pendant lamps (P) To FO or COPPO 5 Celling price 100 6 Material costs 7 Production costs 8 Unit profit 9 Department 1 Department 2 10 11 Decision Variables: 12 Tr Tor Co Pr 13 Units produced 0 0 14 TIF 15 Advertising S O180000 16 17 Objective function: 18EEEEEEEE HELLO 19 max (Profit) = EL 20R EKETLER SELE EFERENSE 21 Constroints GRILL 22 Capacity constraints: SEEKER RENERELLE HP 23 Department 1 regular time SENSO 100000 24 Department 1 overtime 0 25000 ILISELT HER 25 Department 2 regular time 0 90000 BE 26 Department 2 overtime 0 24000 27 Demand constraints: 28 Table lamps N o Godob 29 Floor lamps 30 Ceiling lamps 31. Pendant lamps 32 33 Advertising constraint 180000 200000 AST ger 34 35 36 TOT The Hawley Lighting Company manufactures four types of lamps at its factory including table lamps, floor lamps, ceiling lamps, and pendant lamps. Table 1 presents the average material costs for each of the products. Each product is made in one of two production processes by purchasing components, assembling and testing the product, and finally packaging it for shipping. Table lamps and floor lamps go through the assembly and finishing process in Department 1, while ceiling fixtures and pendant lamps go through the process in Department 2. Variable production costs and capacities are shown in Table 2. The capacities are measured in units of product. Note that there are regular and overtime possibilities for each department. Average selling prices for the four products are known, and estimates have been made of the market demand for each product at these prices (see Table 3). Sales levels can also be affected by advertising expenditures. Starting with the demand levels in the table, an increase of up to $10,000 in advertising raises the demand by the percentage shown in the last row. An expenditure of less than $10,000 in advertising will lead to a proportional effect on demand. For example, an increase in advertising of $5,000 for table lamps would raise demand by 6 percent, or 3,600 units. However, there is a budget limit of $18,000 on the total amount to be spent on advertising among all four products.