Running head: MVC ENTERPRISES PRODUCTION ANALYSIS
MVC Enterprises Production Analysis
Name
BUS 461 Decision Modeling & Analysis
Instructor
Date
1
MVC ENTERPRISES PRODUCTION ANALYSIS
2
MVC Enterprises Production Analysis
To:
Mario Coletta, President
MVC Enterprises
From:
Student Consulting Group
Subject:
Optimal production plan for computer models: Student, Plus, Net & Pro
The Student Consulting Group has evaluated MVC Enterprises’ various model configurations
and available weekly resources in order to recommend a company plant production plan which
fulfills their desire to produce optimal weekly profits. The remainder of this memorandum
documents this analysis process with the objective of maximizing MVC Enterprise’s profits by
calculating an optimal weekly computer production schedule.
MVC Enterprises manufactures four models with separate design configurations, options,
production times, and profits as seen in the below chart.
Table I
MVC Enterprises Computer Configuration
Model & Attributes
Profit
Celeron
Pentium
20 Gg Hard Drive
30 Gg Hard Drive
Floppy Drive
Zip Drive
CD R/W
DVD
15" monitor
17" Monitor
Mini Case
Tower
Prod. Min.
Student
70
1
1
1
1
1
1
1
0.4
Plus
80
1
1
1
1
1
1
Net
130
1
Pro
150
1
1
2
1
1
1
1
1
0.5
0.6
1
1
1
1
1
1
1
0.8
MVC ENTERPRISES PRODUCTION ANALYSIS
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The optimal weekly production analysis was formulated based upon the below weekly available
MVC inventory:
Table II
MVC Enterprises Inventory
Components
Celeron
Pentium
20 Gg Hard Drive
30 Gg Hard Drive
Floppy Drive
Zip Drive
CD R/W
DVD
15" monitor
17" Monitor
Mini Case
Tower
On-Hand Quantity
700
550
800
950
1600
1000
1600
900
850
800
1250
750
Also, computed into the production algorithm is the consideration that MVC is obligated by
contract to produce a minimum of one-hundred Net models per week. The current MVC
production line operates with twenty-five employees. Each employee works an average of thirty
hours per week resulting in seven-hundred and fifty production hours available per week. Using
the projected weekly inventory, model specific component requirements, available production
hours, and pre-established contractual obligations, optimal model assembly was formulated as a
production problem and solved using an EXCEL spreadsheet.
Results
Based on the model requirements in Table I, the available inventory in Table II, and existing
forecasted production hours, MVC Enterprises’ optimal production plan is forecasted to produce
1,225 units per week with a profit of$143,250 as is displayed in Table III.
MVC ENTERPRISES PRODUCTION ANALYSIS
Table III
Model
Student
Plus
Net
Pro
Total
4
MVC Enterprises Forecasted Production Schedule
Quantity Produced
325
100
375
425
1225
Per Unit Profit
$70.00
$80.00
$130.00
$150.00
Total Profits
$22,750.00
$8,000.00
$48,750.00
$63,750.00
$143,250.00
The Student Consulting Group recommends MVC Enterprises implement a production plan to
produce these four models at the quantities reflected in Table II in order to obtain an optimal
weekly profit.
We are asked by Mr. Colleta, what is the minimum price that justifies MVC Enterprises
producing the Plus model. This question can be answered with minimal linear modeling as the
procedure computes the minimum product requirements to be met at minimum costs. This is
accomplished by determining the objective function to be minimized to the point it meet its
extreme point at the constraint threshold (Lawrence & Pasternack, 2002).. In this model analysis,
the costs of the Plus model will be found at the point at which the range of profit can be made
and still not affect the optimal price and MVC production levels.
Additionally, we received indication that MVC Enterprises has an opportunity to purchase
additional 17” monitors for fifteen dollars more than current costs. Using a sensitivity analysis
method in the Solver model, we simulate an increase in availability of one-hundred additional
17” monitors and re-processed the simulation. We find the overall assembled computers drops
to 1175 units, however the overall profits increases by $2500. Subtracting the additional costs of
the monitors ($1,500.00) from the gained profits finds MVC achieves an additional profit of
MVC ENTERPRISES PRODUCTION ANALYSIS
$1000.00 and it is in their best interests to purchase these additional monitors even with a fifteen
dollar price increase.
Finally, MVC Enterprises is considering the employment of an additional computer assembly
employee for the production line at a salary of $1000 per week. Using the computer production
times provided by the company in our production analysis, there is currently a five hour
employee production slack time that is not being utilized. Adding an additional employee at the
same weekly average of thirty hours per employee increases this slack to thirty-five hours.
While initially this seems to be an unneeded cost with no expected gains in production, MVC
management must consider the model constraints do not consider a time allowance for sickness,
vacations, lunch hours, breaks etc. Modeling with the inverse, removing thirty hours of
production time per week of work to account for an injured or sick employee finds the overall
weekly profits drop by $3,750, well over the additional cost of $1000 for a new employee. An
additional employee mitigates these potential losses. In light of this risk, MVC management
must consider the cost of one additional employee, even at an additional $1000 per week versus
the potential adverse affects to the profit margin if even one employee is absent from duty.
The Student Consulting Group would like to offer a thank you to MVC Enterprises for the ability
to assist in their operational analysis and stands ready to support any addition queries or future
queries required.
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MVC ENTERPRISES PRODUCTION ANALYSIS
Reference:
Lawrence, J., and Pasternack, B. (2002). Applied Management Science (2nd Edition). John
Wiley and Sons, Inc.
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