Merton Truck Company

In: Business and Management

Submitted By saske9800
Words 1574
Pages 7
Operations Research
Assignment 1: Merton Truck Company

Submitted to
Professor Sumit Kumar

Sneh Chandel
PGPX 2015-16
Roll No – 1503010


Problem 1 1. (a)
The best product mix can be found out by plotting out the corner points of graph obtained to maximize function p = 3000x + 5000y – 8600000
The above function was derived by subtracting cost price of ‘Truck model 101’ & ‘Truck Model 102’ from sales price of ‘Truck model 101’ & ‘Truck Model 102’.
Sales price is quoted in text as $39,000 for ‘Model 101’ and $38,000 for ‘Model 102’
Cost Price of truck was obtained from following table: | | | Model 101 | | | Model 102 | Direct Materials | | | $24000 | | | $20000 | Direct Labor | | | | | | | | Engine assembly | 1200 | | | 2400 | | | Metal Stamping | 800 | | | 600 | | | Final Assembly | 2000 | | | 1500 | | Total Direct Labor | | | $4000 | | | $4500 | Overhead | | | | | | | | Engine Assembly | 2525 | | | 4850 | | | Metal stamping | 3480 | | | 3080 | | | Final Assembly | 6200 | | | 3500 | | | | | 12205 | | | 11430 | Total | | | 40205 | | | 35930 |

& the below table to calculate the variable overhead for individual trucks:

Department | Variable overhead/unit 101 | Variable overhead/unit 102 | Engine assembly | 2100 | 4000 | Metal stamping | 2400 | 2000 | Model 101 Assembly | 3500 | | Model 102 Assembly | | 2500 | Total | 8000 | 8500 |

Therefore Total costs of the trucks come out to be Direct Material + Direct Labor + Variable overhead
i.e Total cost for ‘model 101’ is $24,000 + $4,000 + $,8000 = $36,000
i.e Total cost for ‘model 102’ is $20,000 + $4,500 + $,8,500 = $33,000
Profit Contribution: | Model 101 | Model 102 | Sales Price | $39,000 | $38,000 | Cost Price | $36,000 | $33,000 | Profit…...

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