Question: Photo Tech, Inc., a manufacturer of rechargeable batteries for digital cameras, signed a contract with a digital photography company to produce three models of lithium-ion battery packs for a new line of digital cameras. The contract calls for the following:
Battery Pack Production Quantity
PT-100 200,000
PT-200 100,000
PT-300 150,000
Photo Tech can manufacture the battery packs at manufacturing plants located in the Philippines and Mexico. The unit cost of the battery packs differs at the two plants because of differences in production equipment and wage rates. The unit costs for each battery pack at each manufacturing plant are as follows:
Plant
Product Phillippines Mexico
PT-100 $0.95 $0.98
PT-200 $0.98 $1.06
PT-300 $1.34 $1.15
The PT-100 and PT-200 battery packs are produced using similar production equipment available at both plants. However, each plant has a limited capacity for the total number of PT-100 and PT-200 battery packs produced. The combined PT-100 and PT-200 production capacities are 175,000 units at the Philippines plant and 160,000 units at the Mexico plant. The PT-300 production capacities are 75,000 units at the Philippines plant and 100,000 units at the Mexico plant. The cost of shipping from the Philippines plant is $0.18 per unit, and the cost of shipping from the Mexico plant is $0.10 per unit.
a. Develop a linear program that Photo Tech can use to determine how many units of each battery pack to produce at each plant to minimize the total production and shipping cost associated with the new contract.
b. Solve the linear program developed in part a, to determine the optimal production plan.
c. Use sensitivity analysis to determine how much the production and/or shipping cost per unit would have to change to produce additional units of the PT-100 in the Philippines plant.
d. Use sensitivity analysis to determine how much the production and/or shipping cost per unit would have to change to produce additional units of the PT-200 in the Mexico plant.