Second Example - Make vs. Buy A manufacturer makes 3 types of products, requiring differing amounts of time & raw material: • Model A: 2 Hours of Wiring, 1 Hour of Harnessing, $50 Raw Material Model B: 1.5 Hours of Wiring, 2 Hours of Harnessing, $83 Raw Material Model C: 3 Hours of Wiring, 1 Hour of Harnessing, $145 Raw Material They received a $750,000 order for the following units: 3,000 Model A, 2000 Model B, 900 Model C ◆ Unfortunately, the manufacturer only has 10,000 hours of Wiring and 5,000 hours of Harnessing available. ◆ Luckily, they can buy additional units to fulfill the order from another manufacturer at the following costs: Model A: $61 Model B: $97 • Model C: $145 ◆ What is the maximum profit the manufacturer can make while fulfilling the order? And how many units are bought (subcontracted) from the other manufacturer!

Second Example - Make vs. Buy A manufacturer makes 3 types of products, requiring differing amounts of time & raw material: • Model A: 2 Hours of Wiring, 1 Hour of Harnessing, $50 Raw Material Model B: 1.5 Hours of Wiring, 2 Hours of Harnessing, $83 Raw Material Model C: 3 Hours of Wiring, 1 Hour of Harnessing, $145 Raw Material They received a $750,000 order for the following units: 3,000 Model A, 2000 Model B, 900 Model C ◆ Unfortunately, the manufacturer only has 10,000 hours of Wiring and 5,000 hours of Harnessing available. ◆ Luckily, they can buy additional units to fulfill the order from another manufacturer at the following costs: Model A: $61 Model B: $97 • Model C: $145 ◆ What is the maximum profit the manufacturer can make while fulfilling the order? And how many units are bought (subcontracted) from the other manufacturer!

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter4: Extent (how Much) Decisions

Section: Chapter Questions

Problem 4.2IP

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