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Automobile Alliance, a large automobile manufacturing company, organizes the vehicles it manufactures into three families: a family of trucks, a family of small cars, and a family of midsized and luxury cars.One plant outside Detroit,MI, assembles two models from the family of midsized and luxury cars. The first model,the Family Thrill seeker, is a four-door sedan with vinyl seats,plastic interior, standard features, and excellent gas mileage.It is marketed as a smart buy for middle class families with tight budgets,and each Family Thrill seeker sold generates a modest profit of $3,600 for the company.The second model,the Classy Cruiser,is a two-door luxury sedan with leather seats, wooden interior, custom features,and navigational capabilities. It is marketed as a privilege of affluence for upper-middle-class families,and each Classy Cruiser sold generates a healthy profit of $5,400 for the company.
Rachel Rosen crantz, the manager of the assembly plant, is currently deciding the production schedule for the next month.Specifically,she must decide how many Family Thrill seekers and how many Classy Cruisers to assemble in the plant to maximize profit for the company. She knows that the plant possesses a capacity of 48,000 labor-hours during the month.She also knows that it takes 6 labor-hours to assemble one Family Thrill seeker and 10.5 labor-hours to assemble one Classy Cruiser.
Because the plant is simply an assembly plant, the parts required to assemble the two models are not produced at the plant. They are instead shipped from other plants around the Michigan area to the assembly plant.For example,tires,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 left-hand doors and 10,000 right-hand doors) from the door supplier. A recent labor strike forced the shut down of that particular supplier plant for several days,and that plant will not be able to meet its production schedule for the next month. Both the Family Thrill seeker and the Classy Cruiser use the same door part.
In addition, a recent company forecast of the monthly demands for different automobile models suggests that the demand for the Classy Cruiser is limited to 3,500 cars. There is no limit on the demand for the Family Thrill seeker within the capacity limits of the assembly plant.
Source:Hillier,F.and Hillier, M. Introduction to Management Science,McGraw-Hill/Irwin,4 th ed.,2011.
1. Which car model is more profitable? Why doesn’t Automobile Alliance just produce that model and forget about the other?
2. What are some of the inputs that Auto mobile Alliance uses to produce its products?(Note: Some are listed above but many are not— use your imagination!)
3. Does Automobile Alliance have enough resources to satisfy all of its demand? If not, then how many units of each model should be produced?
4. What are someways that production capacity can be increased?
5. What would you do if you were Rachel Rosencrantz?
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