The Fly-Right Airplane Company builds small jet airplanes to sell to corporations for use by their executives. To meet the needs of these executives, the company's customers sometimes order a custom design of the airplanes being purchased. When this occurs, a substantial start-up cost is incurred to initiate the production of these airplanes. Fly-Right has recently received purchase requests from three customers with short deadlines. However, because the company's production facilities already are almost completely tied up filling previous orders, it will not be able to accept all three orders. Therefore, a decision now needs to be made on the number of airplanes the company will agree to produce (if any) for each of the three customers. The relevant data are given in the next table. The first row gives the start-up cost required to initiate the production of the airplanes for each customer. Once production is under way, the marginal net revenue (which is the purchase price minus the marginal production cost) from each airplane produced is shown in the second row. The third row gives the percentage of the available production capacity that would be used for each airplane produced. The last row indicates the maximum number of airplanes requested by each customer (but less will be accepted).
The Fly-Right Airplane Company builds small jet airplanes to sell to corporations for use by their executives. To meet the needs of these executives, the company's customers sometimes order a custom design of the airplanes being purchased. When this occurs, a substantial start-up cost is incurred to initiate the production of these airplanes. Fly-Right has recently received purchase requests from three customers with short deadlines. However, because the company's production facilities already are almost completely tied up filling previous orders, it will not be able to accept all three orders. Therefore, a decision now needs to be made on the number of airplanes the company will agree to produce (if any) for each of the three customers. The relevant data are given in the next table. The first row gives the start-up cost required to initiate the production of the airplanes for each customer. Once production is under way, the marginal net revenue (which is the purchase price minus the marginal production cost) from each airplane produced is shown in the second row. The third row gives the percentage of the available production capacity that would be used for each airplane produced. The last row indicates the maximum number of airplanes requested by each customer (but less will be accepted).
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter2: The Purchasing Process
Section: Chapter Questions
Problem 1GPE
Related questions
Question
Transcribed Image Text:The Fly-Right Airplane Company builds small jet airplanes to sell to corporations for use by their executives. To meet the needs of
these executives, the company's customers sometimes order a custom design of the airplanes being purchased. When this occurs, a
substantial start-up cost is incurred to initiate the production of these airplanes. Fly-Right has recently received purchase requests from
three customers with short deadlines. However, because the company's production facilities already are almost completely tied up
filling previous orders, it will not be able to accept all three orders. Therefore, a decision now needs to be made on the number of
airplanes the company will agree to produce (if any) for each of the three customers. The relevant data are given in the next table. The
first row gives the start-up cost required to initiate the production of the airplanes for each customer. Once production is under way.
the marginal net revenue (which is the purchase price minus the marginal production cost) from each airplane produced is shown in
the second row. The third row gives the percentage of the available production capacity that would be used for each airplane
produced. The last row indicates the maximum number of airplanes requested by each customer (but less will be accepted).
Customer 1 Customer 2
3
2
2
4
40%
2
Start-up? (Enter 1 if "Yes", 0 if "No"
Planes to produce
Start-up cost ($million)
Marginal net revenue (Smillion)
Capacity used per plane
Maximum order (planes)
Click here for the Excel Data File
Formulate and solve a spreadsheet model with both integer variables and binary variables for this problem.
a. Determine how many airplanes to produce for each customer (if any) to maximize the company's total profit.
Note: Leave no cells blank. Enter "0" wherever required.
20%
3
Customer 1
b. Determine the total profit.
Note: Round your answer to 1 decimal place.
Customer 3
0
0.8
20%
5
Customer 2 Customer 3
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 6 images
Recommended textbooks for you
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning