Capacity Planning Using Linear Programming

Assuming that the company’s goal is to maximize profits, the current cost system is not an appropriate tool for strategic planning. The ambiguity of the overhead costs per product makes it difficult to accurately analyze the cause and effect relationships of changes and/or improvements to specific product line.

In order to maximize the total profit, the monthly production plan should be 1900 unit/month for Model S and 650 unit/month

In contrast, when capital rationing constraints occur over multiple periods and when there are numerous projects, Baumol and Quandt (1965) suggest that mathematical programming may be used to evaluate investments. The linear programming technique is widely used as the model is specifically designed to search through combinations of projects achieving the highest NPV whilst subject to a budget constraint. However, Brealy et al (2008) note that a main disadvantage to using linear programming may be the models can be highly complex and costly.

The Regional Food Manager for Ye Olde FoodKing Company has retained Mark Craig of Blue Steel Consulting to perform a regression analysis to forecast demand of your product. The four characteristics readily available included price, competitors’ price, average income, and market population. The results of each regression analysis are presented at the end of this memo. The remainder of this memo describes the regression analysis used and limitations to the data available. Running a regression provides a statistical procedure to estimate the liner dependency of one or more

Along with the Benefit Measurement Method, Constrained optimization method can also be used which involves mathematical approach. Since this method involves the mathematical approach, several calculations are performed in order to take a decision to accept or reject the project. “Mathematical models, also known as Constrained Optimization Methods, are a category of project selection methods, which is a tool and technique of the Develop Project Charter process” (PMP, 2008). Cost-benefit analysis is one of the methods which fall into this category. All the positives and negatives of the project are taken into consideration and then the negatives are carefully excluded from the benefits. Different results are produced for the different projects. The most worthy and financially rewarding option are selected from these results. When employing this method, there are many things that are to be considered such as the impact of the decision on the development of the organization in the future, the length of time the equipment lasts and whether it is possible to do the cost control during the project.

ALTERNATIVE 1: _Eliminate poor performing hot dog brands and re-allocate the funds associated with them to existing brands that are doing well in order to increase their sales._

For the analysis the packaged food company ConAgra Foods, Inc (CAG) was chosen. According to ConAgra 2013 Annual report, ConAgra Foods, Inc. is one of the USA’s leading food companies. It has a strong brand recognition and consumer loyalty. ConAgra 's products are sold both in large supermarkets and convenience stores. Company operates in Commercial and Consumer Foods segments. The food industry is especially interesting for the research as the demand on food will stay relatively stable even during economic crises and is continuously growing.

The next step would be for management to know precisely how their decision to downsize capacity would impact the firm’s future operating costs, and also identify specific areas in which the firm could achieve additional cost reductions. Additionally, the cost analysis would help forecast the firm’s operating costs and projected profits (or losses) for the upcoming fiscal year. However, before we can proceed with such analysis, an examination of how the various categories of Continental’s costs behave is in order.

In this case study, production planning of MacPherson Refrigeration Limited (MRL) for the next year is conducted. In order to

Budget development should consider future changes that might influence the operation (Payne-Palacio & Theis, 2015, P.473). Not only budgeting, managers make decisions regarding service, product and performance evaluation in order to provide high-quality service. The active communication within customers and departments, training program and implementation of technology innovation is aimed to ensure the quality of service and product. A good menu design makes the operation more efficient and effective by considering the work process and sanitation in advance. This could help ensure the quality of the

If exactly 3 projects are to be selected from a set of 5 projects, this would be written as 3 separate constraints in an integer program.

As per the cost structure given in the case, Selling costs, Sales and Administration costs, Depreciation and other manufacturing overheads have been considered to be variable costs, i.e. per unit costs and hence have been accounted for in the calculation of profit and loss. As such, this methodology is resulting in a loss of $900 for every Sunday that the plant is operated. Therefore, if the present cost structure is used no production should be done on Sunday since it is clearly unprofitable.

Since 2008, Bergerac had been exploring the opportunity to begin its own production of cartridge components. Plastic suppliers like GenieTech and Elsinore faced difficulties in responding to demand spikes, leading to production delays. Such supplier unreliability made it challenging for Bergerac to optimize its cartridge production. Thus, the company had to carry more inventory of parts and finished goods than Wyckoff could have liked. The obvious appeal to fully control the supply of plastic lead to a strategy, the company has to decide whether to buy or build this capability. GenieTech owner was interested in retirement and was willing to sell the company for a purchase price of $5.75 million. GenieTech has 8 molding presses each could produce 5 cartridges per cycle with a total capacity of 10,782,720 cartridges per year with 5 days production in a week. The other alternative is to build a unit with 4 molding presses which are more efficient than the presses at GenieTech. The total capacity of the unit will be 6,097,371cartridges per year with 5 days production in a week. It is required to predict the best long term decision among the buy and build options.

The management of FedEx gives particular emphasis on the initial purchasing and installation cost of new systems. In line with this, the firm's top managers are supposed to explain LCC of various solutions prior to the installation of new equipment. The initiation of strong LCC is essential in assisting FedEx achieve high financial strategies in the competitive market. Therefore, to maintain a competitive edge, the organization constantly initiates cost savings to improve its profitability (Hsu, 2012).

Upon analysis, it came to the fore that the current system had some obvious drawbacks which motivated the need for a new system. Under the old system, it was assumed that all customer orders placed the same demand on the resources of Kanthal. This was not accurate as customers differed by: the level of technical and commercial service they required, whether they demanded standard or non-standard products and by their ability to forecast their demand. Because of these discrepancies, under the old cost system an order which placed fewer demands on Kanthal's resources would be overcosted and appear to be unprofitable or less profitable than it was. This order would represent a hidden profit. Whereas, an order which placed a disproportionately large burden on the company's resources would appear to be more profitable than it was. This was a hidden loss order. Due to these hidden loss situations, many of Kanthal's resources were employed towards unprofitable products and customers.