Bill of Labor (Hours/Unit)

PRODUCT DRAWING EXTRUSION WINDING PACKAGING

W0075C 1.0 1.0 1.0 1.0
W0033C 2.0 1.0 3.0 0.0
W0005X 0.0 4.0 0.0 3.0
W0007X 1.0 1.0 0.0 2.0
Table 5 Bill of Labor
Problem
1. What recommendations should Ron Garcia make, with what justification? Provide a detailed
analysis with charges, graphs, and computer printouts included.
2. Discuss the need for temporary workers in the drawing department.
3. Discuss the plant layout.
Solution
As a business entity, the maximization of profit is the primary objective. The possible secondary
objectives are commitments to customers, company reputation and quality of the products.
Profits is revenue minus costs. The revenue is taken from the sales of every single unit of products. The
costs in this case are the costs for material, labor and overhead. We can then modify Table 3 into a table
mentioning the profits for every single unit of each product.
Profits
PRODUCT MATERIAL LABOR OVERHEAD COST SELLING
PRICE
PROFITS
W0075C $33.00 $9.90 $23.10 $66.00 $100.00 $34.00
W0033C $25.00 $7.50 $17.50 $50.00 $80.00 $30.00
W0005X $35.00 $10.5 $24.5 $70.00 $130.00 $60.00
W0007X $75.00 $11.25 $63.75 $150.00 $175.00 $25.00
Table 6 Cost, Selling Price and Profits per Unit
Let:
X1 : Number of Product W0075C produced
X2 : Number of Product W0033C produced.
X3 : Number of Product W0005C produced
X4 : Number of Product W0007C produced
Then to objective function will be :

MAXIMIZE 34X1 + 30X2 + 60X3 + 25X4 .(1)

Vivian has given her words to a key customer that they are going to manufacture 600 units of X4 and
150 units of X1. Then we have:

X1 150 (2)
X4 600
For each process, there are boundaries regarding the hour of plant capacity as follow:

PRODUCTS
Maximum
Plant
Capacity
(Hours)
W0075C W0033C W0005C W0007C
(X1) (X2) (X3) (X4)
DRAWING 1 2 - 1 4,000
EXTRUSION 1 1 4 1 4,200
WINDING 1 3 - - 2,000
PACKAGING 1 - 3 2 2,300
Table 7 Plant Capacity
X1 + 2X2 + X4 4,000
(3)
X1 + X2 +4X3 + X4 4,200
X1 + 3X2 2,000
X1 +3X3 + 2X4 2,300

If we assume that Mexicana Wire Works works based on order then :
X1 1,400
X2 250 (4)
X3 1,510
X4 1,116



Thus, we will have the following model :
Objective : Z: f(X1,X2,X3,X4) = MAX {34X1 + 30X2 + 60X3 + 25X4 }
Constraints: X1 150
X4 600
X1 + 2X2 + X4 4,000
X1 + X2 +4X3 + X4 4,200
X1 + 3X2 2,000
X1 +3X3 + 2X4 2,300
X1 1,400
X2 250
X3 1,510
X4 1,116
X1 , X2 0
By entering the model given above to the POM software table :
Mexicana Wire Works Solution
X1 X2 X3 X4 RHS Dual
Maximize 34 30 60 25
Constraint 1 1 0 0 0 >= 150 0
Constraint 2 0 0 0 1 >= 600 -43
Constraint 3 1 2 0 1 <= 4000 0
Constraint 4 1 1 4 1 <= 4200 0
Constraint 5 1 3 0 0 <= 2000 0
Constraint 6 1 0 3 2 <= 2300 34
Constraint 7 1 0 0 0 <= 1400 0
Constraint 8 0 1 0 0 <= 250 30
Constraint 9 0 0 1 0 <= 1510 0
Constraint 10 0 0 0 1 <= 1116 0
Solution-> 1100 250 0 600 59900
Table 8 POM Software Result
Assuming that by doubling the number of worker we can reduce the labor time in drawing department
by 50% .but also increase the labor cost by 32% (4,000 hours out of total 12,500 hours). The following
model is the modified model after reconsidering the labor time and labor cost :
Objective : Z: f(X1,X2,X3,X4) = MAX {30.83X1 + 27.60X2 + 56.64X3 + 21.40X4 }
Constraints: X1 150
X4 600
0.5X1 + X2 + 0.5X4 4,000
X1 + X2 +4X3 + X4 4,200
X1 + 3X2 2,000
X1 +3X3 + 2X4 2,300
X1 1,400
X2 250
X3 1,510
X4 1,116
X1 , X2 0
The result is given in the following table :
Mexicana Wire Works Solution
X1 X2 X3 X4 RHS Dual
Maximize 30.83 27.6 56.64 21.4
Constraint 1 1 0 0 0 >= 150 0
Constraint 2 0 0 0 1 >= 600 -40.26
Constraint 3 .5 1 0 .5 <= 4000 0
Constraint 4 1 1 4 1 <= 4200 0
Constraint 5 1 3 0 0 <= 2000 0
Constraint 6 1 0 3 2 <= 2300 30.83
Constraint 7 1 0 0 0 <= 1400 0
Constraint 8 0 1 0 0 <= 250 27.6
Constraint 9 0 0 1 0 <= 1510 0
Constraint 10 0 0 0 1 <= 1116 0
Solution-> 1100 250 0 600 53653
Table 9 POM Software Result After Increase the Drawing Dept Headcounts
Conclusion
By searching for maximum profits, based on the LP using POM software, the maximum profits will be
$59,900 resulted from the manufacturing 1,100 units of W0075C , 250 units of W0033C , and 600 units
of W0007X . The result also suggests not to produce W0005C product.
By adding more headcounts in the drawing department, it is going to reduce the labor time yet it
increases the labor cost up to 32%. According to the result from POM software, the quantity of the
product still the same, yet it is not a change for better but for less profit ($53,653) due to no increase in
the pricing but burdened by the increased cost.
Recommendation
It is for maximum profits to produce 1,100 units of W0075C , 250 units of W0033C , and 600 units of
W0007X. Company must turn down the orders to produce 1,510 units of W0005X. It is better for the
company not to increase the number of employee in the drawing department in order to keep the cost
down.