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Unformatted text preview: ARE 155 Spring 2010 Final Exam Review  Selected Solutions Text Form 420. We use the Sensitivity Report given in Screenshot 49 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
 LUNDBLAD

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