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Unformatted text preview: ARE 155 Spring 2010 Final Exam Review - Selected Solutions Text Form 4-20. We use the Sensitivity Report given in Screenshot 4-9 to answer the following questions. (a) Each additional pound of material will increase prot by $0.5. The 2 pounds will therefore cause prot to increase to $29. (b) Each additional hour of labor will increase prot by $1. The 1.5 hours will therefore cause prot to increase to $29.50. (c) First, we check the 100% rule. (1/2) + (1.5/4) = 0.875 < 1. The shadow prices are therefore valid. The new profit = $28 - 1.5 x $0.5 + 1 x $1 = $27.75. The deal is not worthwhile. (d) First, we check the 100% rule. (0.75/1) + (0.25/1) 1. The solution remains optimal and the shadow prices are valid. New profit = 2 x $4.75 + 4 x $4.75 = $28.50. (e) Decrease in current prot if 1 unit of the new product is produced = 1 x $1 +1 x $0.5 -2 x $0 = $1.50. Profit contribution of new product = $2. Hence, the net prot will increase by $0.50 for each unit produced of the new contribution of new product = $2....
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This note was uploaded on 10/06/2010 for the course ARE 52517 taught by Professor Lundblad during the Spring '10 term at UC Davis.
- Spring '10