ECO 550 FINAL EXAM

1) a. Sheen should stock the optimal stocking quantity in this situation, which is 584 newspapers. The expected profit at this stocking quantity is $331.44. b. Q= µ+Φ-1(Cu/(Cu+C0))δ Q=500+ Φ-1(.8/(.2+.8))100 Q=500+(..7881)(100) Q=579 This is off by 5 newspapers from the model given in the spreadsheet, which results in a $.03 difference in profits. 2) a. With the opportunity cost of her time per hour being equal to $10, Sheen should invest 4 hours daily into the creation of the profile section. This would raise here optimal stocking quantity to 685 newspapers and would increase her expected daily profit to $371.33. b. Sheen’s choice of effort level, h, to be 4 hours was chosen because, in order to maximize profit, she would need an effort

The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June:

The following linear programming problem has been written to plan the production of two products. The company wants to maximize its

6. Furniture. The presence or absence of furniture is recorded for each unit, and represented with a single dummy variable (1 if the unit was furnished and 0 if

Consider the production schedules for two fictional countries, Ying and Tai. Both countries can only produce two types of goods, Lychees and Teacups. The rows a to e depict the possible combinations of these two goods that each country can produce. Ying Number of Number of Lychees Teacups 0 12 2 Tai Number Lychees 4

his case deals with strategic planning issues for a large company. The main issue is planning the company’s production capacity for the coming year. At issue is the overall level of capacity and the type of capacity—for example, the degree of flexibility in the manufacturing system. The main tool used to aid the company’s planning process is a mixed integer linear programming (MILP) model. A mixed integer program has both integer and continuous variables.

Each week there are 300 pounds of material 1; 400 pounds of material 2; and 200 hours of labor. The output of product A should not be more than one-half of the total number of units produced. Moreover, there is a standing order of 10 units of product C each week.

usually a white noise with intensity 2. The model is considered either on integers t 2 Z, thus without

Q6: How much production fixed expenses should be allocated to 1 kg of "complete meal"? Give a specific number and your logic to support the

needs to determine the right amount of capacity for each product line. At the end of round 4th, the company had excess capacity on Cake and Cid product lines. That happens when the firm’s present production amount is fewer than the amount that it can truly produce (www.investopedia.com). The reason was due to that Chester Co. falsely forecasting demand, recklessly predicting customers continued to purchase our products again. The company needs to rely on the actual conditions of the products in order to have the right investment in plant improvement. By that way, the firm can use the capacity more effectively. For instance, with Cake line, Chester Co. did not make the products as what customers preferred leading to failure in driving sales. However, the company was still subjective to think that the demands of the customer for this product were high; and kept investing in its capacity. This was a big mistake. In reality, customer’s taste for Cake went down; hence, the firm had to lower production schedules, which led to almost a double excess capacities for Cake product line (1,100 units) compare to the number of units it scheduled for production (1,261 units). Similar to Cid line, the firm scheduled for 239 to produce, and left 500 unused capacities. Chester Co. may sell those excess capacities on these two lines in order for them to meet the production schedules in the future. Furthermore, the company can raise the capital. Henceforward, Chester Co. can

1. A manufacturer produces 1,000 basketballs each day, which it sells to customers for $30 each. All costs associated with production and sales total $10,000; however, if the manufacturer were to produce one additional basketball per day, total costs would increase to $10,100. From these amounts, we can tell that

Warren Company makes candy. During the most recent accounting period, Warren paid $3,000 for raw materials, $4,000 for labor, and $2,000 for overhead costs that were incurred to make candy. Warren started and completed 10,000 units of candy, of which 7,000 were sold. Based on this information, Warren would recognize which of the following amounts of expense on the income

* Use the profit maximization rule MR = MC to determine your optimal price and optimal output level now that you have market power. Compare these values with the values you generated in Assignment 1. Determine whether your price higher is or lower.)

We want to know the amount aluminum cans account for in the cost of sales. According to the provided information cans account for 60% of net revenues. Net revenue in 1994 will be $231,207 * 1.04 = $240,455. The cans contribute 0,60 * $240,455 = $144,273. With a gross margin on cans of 27% the cost of sales of aluminum cans for 1994 is

The shadow prices for each of the constraints show how much the objective function would get better or worse by if the right hand side was increased by one unit. For instance if the total number of trucks needed for month 1 increased from 10 to 11, the cost would get better by $2485 or decrease by $2485 (since the shadow price is the negative of the dual price). The positive dual values for the long-term trucks show that using the long-term trucks instead of the short-term trucks actually