CASE #8 - Linear Programming Applications

Name(s):

Expedition Outfitters is a small company that manufactures specialty clothing for hiking,
skiing, and mountain climbing. Company management has decided to begin production on
two new parkas designed for use in extremely cold weather; the names selected for the two
models are the Mount Everest Parka and the Rocky Mountain Parka.
The company would like to schedule the production of each of the two models for the next
three months. The manufacturing plant has 240 hours of production each month and can
increase to 300 hours if a maximum of 60 hours of overtime are scheduled. Each Mount
Everest Parka requires 60 minutes of production time, and each Rocky Mountain Parka
requires 45 minutes. The raw material costs are $120 for each Mount Everest and $80 for
each RMP, while the cost of labor is $15 per hour on regular time and $19 per hour on
overtime. The retail prices through the firm’s mail-order catalog are $250 for the MEP and
$200 for the RMP.
Expedition outfitters owns a storehouse where it can keep units in storage. There is enough
space to store 100 coats and it costs $3 to store one coat for a month, regardless of the
model. Management would like to keep at least 50 units of each model in stock at the end
of the year.
Assuming that Expedition Outfitters has estimated the following demands for the next
three months:

Type of coat October November December

Mount Everest 140 160 180
Rocky Mountain 100 140 130

(a) Develop a linear model to determine the amount of coats that should be produced and
stored each month in order to maximize the overall profit for the last quarter of the year.

(b) Develop an EXCEL spreadsheet to find the optimal solution for Expedition Outfitters.
Make sure that your solution makes sense! (submit the file in Canvas).

(c) Write a short report explaining what the best strategy for the company is.

(d) Due to some increase in the special coating of the Mount Everest, the cost of producing
each Mount Everest coat in December will increase by $5. Will this change the optimal
production plan? And the total profit?

(e) Because of some improvements in the storage process, the cost of storing one coat can
be reduced to $2.7. Can we determine using only the sensitivity analysis, what the new
production plan would be? And the overall profit? If it is not possible, change this figure
in the Excel and recalculate the solution. Report here the answer.

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(f) If the production capacity in regular time could be increased in any of the three months,
which would be the best month to assign some extra time to? Why?

(g) One of our customers would like to place a last minute order of 40 additional units of
Rocky Mountain in November. Would it be possible to produce these extra units? How
much would it cost to do so? How much profit would Expedition Outfitters obtain with
this additional order?