CASE 3.1 AGEOUASSERIGIY Automobile Alliance, a large automobile manufacturing company, organizes the vehicles it manufactures into three families: 8 family of tucks, a family of small cars, and 2 family of midsized and laxury curs. One plant outside De- troit, MI, assembles two models from the family of midsized custom features, and navigational capabilities. It is mar- beted as a privilege of affluence for upper-minddle-classf ilies, and each Classy Cruiser sold generates a healthy profit, of $5,400 for the company. Rachel Rosencrantz, the manager of the assembly plant, is currently deciding the production schedule for the next ‘month. Specifically, she must decide how many Family ‘Thillsekers and how many Classy Cruisers to assemble in the plant to maximize profit for the company. She knows tha the plant possesses capacity of 48,000 labor-hours dur ing the month. She also knows that it takes 6 labor-hours fo assemble one Family Thrillseeker and 10.5 labor-hours fo assemble one Classy Cruise ‘Because the plants simply an assembly plant, the parts required to assemble the two models are not produced atthe punt, They are instead shipped from other plants around the Michigan area to the assembly plant. For example, tres, steering wheels, windows, seats, and doors all arrive from various supplier plants, For the next month, Rachel knows that she will be able to obtain only 20,000 doors (10.000 Teft-hand doors and 10,000 right-hand doors) from the door supplier. A recent labor sirike forced the shutdown of that particular supplier plant for several days, and that plant ill not be able to meet its production schedule for the next ‘month, Both the Family Thrillseeker and the Classy Cruiser use the same door part. In addition, a recent company forecast of the monthly demands for different automobile models suggests thatthe demand for the Classy Cruiser is limited to 3.500 cars. ‘There is no limit on the demand for the Family Thrillseeker within the capacity limits of the assembly plant (@) Formulate and solve a linear programming problem to deter mine the number of Family Thnilseekers and the number of Classy Cruisers that shouldbe assembled. Before she makes her final production decisions, Rachel plans to explore the following questions independently ex- cept where otherwise indicated. (©) The marketing department knows that it can purse a targeted $500,000 advertising campaign that wll ase the demand for the Classy Cruiser next month by 20 percent. Should he carne ign be undertaken? (e) Rac! knows Ut hea increase mnt spa spi ‘by using overtime labor. She ean ness the pan’ abr hoa capacity by 25 percent With the new assembly plant capacity ‘how many Family Tilscokors and how many Classy Cruisers sould be asscmbled? (4) Rachel Knows dat overtime labor does nt come without an ex try cos What sth masitmum amount she should be wling and luxury cary. The fist model, the Family Thrillseeker, is a four-door sedan with vinyl seats, plastic interior, standard features, and excellent gs mileage. It is marketed as a smat buy for middle-class families with tight budgets, and each Family Thrillseoker sold generates a modest profit of $3,600 for the company. The second model, the Classy Cruiser, is {two-door luxury sedan with leather seats, wooden interior, ‘ay forall overtime Ioe beyond the cost af this abo stro lar time rtee? Expree your answer ao a mp sum. () Rache! explores the osin of using both the targeted advertis- ‘ng campaign and the overtime lor-nours. The advertising ‘campaign rises the demand for the Classy Crise by 20 per- ‘ent, and the overtime labor increases the plat’ labor hour a pacity by 25 percent. How many Family Trilseekers and how many Classy Cruisers should be assembled usin the aver ing campaign and overtime labor-hours ifthe profit ftom each CClasey Cruiser sold continues to be $0 percent more than for cach Family Thillsecker sola?” (8 Knowing thatthe adverising campaign costs $300,000 and the ‘maximum usage of overtime labor hours costs $1,600,000 be- ‘yond regula ime rates, isthe solution found in part (e) a wise ‘ecision compared o the solution found in par (a)? (g) Avtomobile Alliance has determined that dealerships are act ally heavily discounting the price of the Family Thillseekers twimove them othe To, Bocuse af profi-sharing agreement ith is dealers, dhe company is therefore not making a profit ‘of $3,600 on the Family hrillbecker but i instead making a profit of $2800. Determine the number of Family Thilsek- er and the numberof Classy Cruisers tbat shouldbe assem ‘led siven this new discounted price (hy The company has discovered quality problems with the Fam- ily Thrlbeeker by randomly testing Thrlseekers at the end ‘of the assembly line. Inspectors have discovered that in over ‘60 percent ofthe cases, 140 ofthe our doors ona Tilsecker ‘do not seal propery, Recause the percentage of defective “Thlseckers determined by th random testing isso high, the ‘oor supervisor has decided to perform quality contol tests fon every Thillsceker at the ead ofthe ine. Because of the faded tests, the time it kes t assemble ove Family ‘Thilseker as increased from 6 0 7.5 hours. Determine the ‘numberof units ofeach mods tha should be ascmbled given the new assembly time for the Family Thrilseker {The bound ofciectors of Automobile Alliance wishes 0 cap ture larger shar ofthe luxury sedan market and therefore ‘would like to moot the full demand for Cassy Cruisers. They ask Rachel to detemine by how much the profit of her as- sembly plant would decrease as compare tothe profit found part (a). They then ask her to meet the full demand for Classy Cruisers if the decrease in profit ie not more than 2,000,000, (@) Rachel now makes her final decison by combining al the we considerations describe in arts (),(g) and (3). What are hor final decisions on wheter to undertake the advertising eam ign, whether 10 use overtime lor, the number of Family ‘Thailcokors to assemble, and the number of Classy Cruisers to assemble?