quiz LO3 monet problem sensitivity analysis
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1
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If the profit margin of frame 1 increases by $1.50, the optimal production quantities will change from the current values. T or F?
false
\
explanation: Since the increase of 1.5 is less than the allowable increase of 1E+30 (which is the infinity), the optional production quantities do not change.
\
explanation: Since the increase of 1.5 is less than the allowable increase of 1E+30 (which is the infinity), the optional production quantities do not change.
2
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If the profit margin of frame 1 decreases by $1.50, the optimal production quantities will change from the current values. T or F?
false
\
explanation: Since the decrease of 1.5 is less than the allowable decrease of 2, the optional production quantities do not change.
\
explanation: Since the decrease of 1.5 is less than the allowable decrease of 2, the optional production quantities do not change.
3
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If the profit margin of frame 2 increases by $1.50, the optimal production quantities will change from the current values. T or F?
True
\
explanation: Since the increase of 1.5 is greater than the allowable increase of 1 for Frame 2, the optional production quantities change.
\
explanation: Since the increase of 1.5 is greater than the allowable increase of 1 for Frame 2, the optional production quantities change.
4
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If the profit margin of frame 2 decreases by $1.50, the optimal production quantities will change from the current values. T o F?
False
\
explnaation: Since the decrease of 1.5 is less than the allowable decrease of 2 for Frame 2, the optional production quantities do not change.
\
explnaation: Since the decrease of 1.5 is less than the allowable decrease of 2 for Frame 2, the optional production quantities do not change.
5
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If total available labor hours increases by 1500 hours, the profit will be ______
8000
\
explanation: The increase of 1500 in the labor hours is less than the allowable increase of 1E+30. Therefore, the shadow price of zero will be valid, which means the profit will increase by 0 (=1500 \* 0). As a result, the profit will be the same as the current profit, which is $8,000 (1000\*6 + 1000\*2).
\
explanation: The increase of 1500 in the labor hours is less than the allowable increase of 1E+30. Therefore, the shadow price of zero will be valid, which means the profit will increase by 0 (=1500 \* 0). As a result, the profit will be the same as the current profit, which is $8,000 (1000\*6 + 1000\*2).
6
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If total available labor hours decreases by 1500 hours, the profit will be ______
Unknown
7
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If total available metal increases by 1500 oz, the profit will be ______
9500
\
explanation: The increase of 1500 in the metal is less than the allowable increase of 2000. Therefore, the shadow price of one (1) will be valid, which means the profit will increase by 1500 (=1500 \* 1). As a result, the profit will be $9,500 ($8000 + 1500).
\
explanation: The increase of 1500 in the metal is less than the allowable increase of 2000. Therefore, the shadow price of one (1) will be valid, which means the profit will increase by 1500 (=1500 \* 1). As a result, the profit will be $9,500 ($8000 + 1500).
8
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If total available metal decreases by 1500 oz, the profit will be ______
6500
\
explanation: The decrease of 1500 in the metal is less than the allowable decrease of 2000. Therefore, the shadow price of one (1) will be valid, which means the profit will decrease by 1500 (=1500 \* 1). As a result, the profit will be $6,500 ($8000 - 1500).
\
explanation: The decrease of 1500 in the metal is less than the allowable decrease of 2000. Therefore, the shadow price of one (1) will be valid, which means the profit will decrease by 1500 (=1500 \* 1). As a result, the profit will be $6,500 ($8000 - 1500).
9
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If available metal increases by 1500 oz, the optimal production quantities of frame 1 and frame 2 ______
\
\
are needed to be recalculated.
\
explanation: Since the metal is a binding constraint (that is, it is a resource that is completely used), having more metal will increase the production quantities. We do not know, however, how much more can be produced. On the other hand, we can tell how much more profit can be made using the shadow price (Question #7).
\
explanation: Since the metal is a binding constraint (that is, it is a resource that is completely used), having more metal will increase the production quantities. We do not know, however, how much more can be produced. On the other hand, we can tell how much more profit can be made using the shadow price (Question #7).
10
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If they can buy additional 100 ounces metal at the price of $0.90, they should go ahead and buy to increase their profit. (Note that the regular price of metal is $0.50 per ounce.) T or F
true
\
exp: According to the shadow price of metal, they make $1 profit after paying the regular cost of $0.50 as long as the increase is less than or equal to 2000 (allowable increase). Since they now pay $0.40 more than the regular cost, their profit per oz will decrease by $0.40. This means each oz of metal now bring them $0.60 profit. Bases on this analysis, they should go ahead and buy additional 100 oz of metal at $0.90/oz, which will bring them additional $60 profit (0.60 \* 100).
\
exp: According to the shadow price of metal, they make $1 profit after paying the regular cost of $0.50 as long as the increase is less than or equal to 2000 (allowable increase). Since they now pay $0.40 more than the regular cost, their profit per oz will decrease by $0.40. This means each oz of metal now bring them $0.60 profit. Bases on this analysis, they should go ahead and buy additional 100 oz of metal at $0.90/oz, which will bring them additional $60 profit (0.60 \* 100).
11
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If they buy additional 100 ounces of metal at $0.90/oz, what is the projected increase/decrease in the profit?
\n $60
\
exp: According to the shadow price of metal, they make $1 profit after paying the regular cost of $0.50 as long as the increase is less than or equal to 2000 (allowable increase). Since they now pay $0.40 more than the regular cost, their profit per oz will decrease by $0.40. This means each oz of metal now bring them $0.60 profit. Bases on this analysis, they should go ahead and buy additional 100 oz of metal at $0.90/oz, which will bring them additional $60 profit (0.60 \* 100).
\
exp: According to the shadow price of metal, they make $1 profit after paying the regular cost of $0.50 as long as the increase is less than or equal to 2000 (allowable increase). Since they now pay $0.40 more than the regular cost, their profit per oz will decrease by $0.40. This means each oz of metal now bring them $0.60 profit. Bases on this analysis, they should go ahead and buy additional 100 oz of metal at $0.90/oz, which will bring them additional $60 profit (0.60 \* 100).
12
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If they buy additional 100 ounces of metal at $1.30/oz, what is the projected increase/decrease in the profit?
$20
\
exp:
Hide question 12 feedback
According to the shadow price of metal, they make $1 profit after paying the regular cost of $0.50 as long as the increase is less than or equal to 2000 (allowable increase). Since they now pay $0.80 more than the regular cost, their profit per oz will decrease by $0.80. This means each oz of metal now bring them $0.20 profit. Bases on this analysis, they should go ahead and buy additional 100 oz of metal at $1.30/oz, which will bring them additional $20 profit (0.20 \* 100).
\
exp:
Hide question 12 feedback
According to the shadow price of metal, they make $1 profit after paying the regular cost of $0.50 as long as the increase is less than or equal to 2000 (allowable increase). Since they now pay $0.80 more than the regular cost, their profit per oz will decrease by $0.80. This means each oz of metal now bring them $0.20 profit. Bases on this analysis, they should go ahead and buy additional 100 oz of metal at $1.30/oz, which will bring them additional $20 profit (0.20 \* 100).
13
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If they produce 999, instead of 1000, Frame 1, the profit
decreases.
\
exp: The optimal production quantities (1000 Frame 1 and 1000 Frame 2) guarantee the maximum profit, and they cannot do better with other production quantities. Therefore, if they deviate from the optimal production quantities, their profit will decrease.
\
exp: The optimal production quantities (1000 Frame 1 and 1000 Frame 2) guarantee the maximum profit, and they cannot do better with other production quantities. Therefore, if they deviate from the optimal production quantities, their profit will decrease.