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Finance & Accounting
Pages 4 (1004 words)
SENSITIVITY REPORT Submitted By Course Instructor: Institution Affiliation: Date Submitted: In this case, we consider 120 hours, 72 hours, and 4 hours of machine hours when producing the products A and B (see Appendix A). with regards to the shadow price, very hour of machine time translates to profit increase of ?
These resources are the machine time for this case as profits for the products is not sought as a solution to the company’s problem of finding the best combinations for the products. With regards to the three resources available in this analysis, they represent hours at the machines’ disposal. However, it is observed that, it more hours per machine were allowed, then higher total profits would be increase immensely. In order to answer questions like whether it is reason for the company to invest in more machine hours, should the company be willing to pay for more manufacturing time, and whether is profitable to hike the production hours. Using the solver solution represented as table 1, these questions and how they relate to the right combinations for product production can be identified. Using a theoretical analysis approach, it is by design that changes in right-hand-side of the constraint; a corresponding change is registered not unless it is conditional that the constraint is redundant. This translates to a change in the optimal solution as well. With regards to the reduction of hours the machines time may result to a increase of decrease in profit per hour. The change in profit per hour is referred to as the shadow price and is therefore used to determine whether the company should consider investing in more machine hours or a better combination of the produced products. ...
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