Essay Cove

Essay Cove

Word count: 1000 words
Included some calculations and explanations of this work.
Please see the informations of this document.
The Mansion Group has 17 operating subsidiaries. Your team, as consultants, has been employed by the board of directors of the group to provide recommendations on a range of issues faced by some of its subsidiaries. The details of the issues faced by the respective subsidiaries for which your expertise is sought are as follows:
Readymix Ltd
Readymix Ltd manufactures three products: Product RR, Product DD and Product MM. The contribution per unit of the respective products is as follows:
Product RR Product DD Product MM
Contribution per unit £420 £320 £620
The manufacture of these products involves two processes: Process Ready and Process Mix. The processing time requirements of each product (in hours) are as follows:
Product RR Product DD Product MM
Process Ready 25 50 40
Process Mix 35 40 55
The monthly processing time of Process Ready and Process Mix is limited to 50,000 hours and 80,000 hours respectively. The sales of Product RR are limited to 900 units per month due to regulatory restrictions.
The objective of the company is to maximise contribution.
Required:
a) Using the simplex method, determine the optimal production plan. You should show and clearly explain all workings. Your answer should be rounded to 3 decimal places.
(22 marks)
b) New regulations stipulate that Readymix Ltd will be allowed to sell an additional 800 units of Product RR per month provided that a levy of £25 is paid for every additional unit sold. The company is confident that there will be demand for the additional units of Product RR.
Advise Readymix Ltd whether the production of the additional 800 units of Product RR per month should be undertaken.
(4 marks)
c) A supplier has informed Readymix Ltd that it will be increasing its material prices. As a result, the variable cost of Product MM will increase by £60 per unit.
Assess the impact of this change in variable cost on the monthly total contribution of Readymix Ltd.
(4 marks)

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