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Business
Operations Management
An Insurance Company is introducing two new product lines: special risk insurance and mortgages. The expected profit is $5 per unit on special risk insurance and $2 per unit on mortgages. Management wishes to establish sales quotas for the new product lines to maximize total expected profit. The work requirements are as follows:  - Should the company consider acquiring an additional 500 hours for the Underwriting department at a cost of $2 per hour, and why?  - Based on the sensitivity report, can you determine the increase or decrease in profit if 100 work hours were transferred from Administration to Underwriting? If not, how you would be able to find the profit change in such a scenario.

An Insurance Company is introducing two new product lines: special risk insurance and mortgages. The expected profit is $5 per unit on special risk insurance and $2 per unit on mortgages. Management wishes to establish sales quotas for the new product lines to maximize total expected profit. The work requirements are as follows:  - Should the company consider acquiring an additional 500 hours for the Underwriting department at a cost of $2 per hour, and why?  - Based on the sensitivity report, can you determine the increase or decrease in profit if 100 work hours were transferred from Administration to Underwriting? If not, how you would be able to find the profit change in such a scenario.

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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An Insurance Company is introducing two new product lines: special risk insurance
and mortgages. The expected profit is $5 per unit on special risk insurance and $2 per unit on
mortgages. Management wishes to establish sales quotas for the new product lines to
maximize total expected profit. The work requirements are as follows:

 - Should the company consider acquiring an additional 500 hours for the Underwriting
department at a cost of $2 per hour, and why?

 - Based on the sensitivity report, can you determine the increase or decrease in profit if 100
work hours were transferred from Administration to Underwriting? If not, how you would be
able to find the profit change in such a scenario.

Department Underwriting Administration Claims Work-Hours per Unit Special Risk Mortgage 2 1 0 3 0 2 Work-Hours Available 2400 800 1200
Transcribed Image Text:Department Underwriting Administration Claims Work-Hours per Unit Special Risk Mortgage 2 1 0 3 0 2 Work-Hours Available 2400 800 1200
Variable Cells Final Reduced Cell Name Value Cost $D$E Sp Risk 600 $D$7 Mortgage 300 Constraints 0 0 Objective Coefficient 1 0 1 5 2 Final Shadow Constraint Cell Name Value Price R.H. Side $F$6 Underwr 2400 $F$7 Admin 300 $F$8 Claims 1200 2400 800 1200 Allowable Increase 1E+30 1.333333333 Allowable Increase 1000 1E+30 Allowable Decrease Allowable Decrease 2 2 600 500 400 666.6666667
Transcribed Image Text:Variable Cells Final Reduced Cell Name Value Cost $D$E Sp Risk 600 $D$7 Mortgage 300 Constraints 0 0 Objective Coefficient 1 0 1 5 2 Final Shadow Constraint Cell Name Value Price R.H. Side $F$6 Underwr 2400 $F$7 Admin 300 $F$8 Claims 1200 2400 800 1200 Allowable Increase 1E+30 1.333333333 Allowable Increase 1000 1E+30 Allowable Decrease Allowable Decrease 2 2 600 500 400 666.6666667
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