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. To a constraint, the shadow price represents the improvement to the functional objective that may be a product of one-unit increase within the constraints right-hand-side. With regards to the fact that the profits generated per hour in normal circumstances is ?0.33333 the right combinations of the products are desired in order to preserve the need for increasing machine time. Hence fore, the fact that the company’s profit increased with ?0.3333 for every additional hour, it means that more product B types should be considered if time alone is to be considered. However, while the value of one product A is 24 Sterling Pounds and that of product B is 4 sterling pounds. Therefore, it is also observed that for every single product A a profit of 2 sterling pounds is made as compared to the 4 sterling pounds’ profit on product B. However, given that product A produces at machine at for four hours and two hours at machine B. The total amount of products producible at machine A will be 30 products with regards to the count of four hours for a machine allowance time of 120. On the other hand, the same product can process at machine B for two hours against the allowed duration of 72 hours to give 36 products A. With reference to product B, out of the allowed machine hours for machine A, 120 hours, only 20 product Bs can be produced within the time limit of 6 hours per product. This means that on the other hand, the only 12 product Bs can be produced using machine B speed of 6 hours per product against the allowed timeframe of 72 hours. In this case, since hours are constant and the company does not need to increase machine hours in order to keep investment at the original figure. This means that for product A to be processed within the time frame allowed for machine A and B will translate to a profit of ?60 per hour when processed in machine A and ?72 when process by machine B. On the case of product B, the solver solution shows that for all products B producible in machine A will yield a profit of ?80 with respect to the ?4 profit margin for every unit of ...
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“Sensitivity Report Coursework Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.net/finance-accounting/114401-sensitivity-report.
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