Swarthy Solution

# Swarthy Solution - Swarthy Snow Industries Name Production...

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Swarthy Snow Industries: Commission Sales person? Final Objectiv e Allowable Allowable Name Value Coefficie nt Increase Decrease Production S1 3,000.00 191.60 Infinity 54.13 Production S2 699.10 314.80 123.95 314.80 Production S3 1,500.00 108.50 Infinity 36.46 Final Shadow Constrai nt Allowable Allowable Name Value Price R.H. Side Increase Decrease S1 Demand 3,000.00 54.13 3,000.00 312.26 231.05 S2 Demand 699.10 - 800.00 Infinity 100.90 S3 Demand 1,500.00 36.46 1,500.00 337.51 440.93 Labour (hours) used 55,000.00 13.46 55,000.0 0 2,359.00 16,345.00 Wood (meters) used 9,648.20 - 10,000.0 0 Infinity 351.80 A Sauder marketing grad wants a \$4,000 fixed payment plus a 5% commission to sell the S1. He feels that he will be able to increase sales by 200-300 units. As the management of Swarthy do you want to accept this proposal?
Benefit is benefit at low end is #200 [\$54.13 – (.05)(\$700)]

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Unformatted text preview: \$3,826 Fixed (\$4,000) Loss in year one (174) Question could be: Impact beyond year one Benefit at the high end is #300[\$54.13 – (.05)(\$700) \$5,739 Fixed (4,000) Gain \$1,739 This looks to be attractive. Of course the question arises as to the likelihood of securing the #200; which is the “Worst case”. If this is risky to management the \$4,000 lump sum could be made conditional upon reaching a certain sales target. Other management issues would pertain to timing and scheduling of production. When will we know the demand. Since an increase in production of S1 would reduce production of the other products. The very nature of LP as a tool is to create a static plan based on a set of constraints, if the constraints are “moving” this makes planning more of a challenge....
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• Winter '08
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• Sales, Swarthy Snow Industries, Snow Industries, Commission Sales person, Sauder marketing grad

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