CASE: Merton Truck Company. Quantitative Techniques- II Assignment: 1. Section: F Group number 3. Submitted To: Prof. Bhuvanesh Pareek Submitted By. 12 Dec Free Essay: EMBA MERTON TRUCK COMPANY CASE SOLUTION HARSHID DESAI AMRUT MODY SCHOOL OF MANAGEMEMNT. View Notes – Merton Truck Case Report from FINANCE at Xiamen University. Case Solution Merton Truck Company Submitted by: Group 5(Section G).

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The binding constraints seen in Exhibit 4 are no longer the Model Assemblies s seen with earlier combinations, but are now the Engine Assembly and Metal Stamping departments. How much greater than supply is the demand? A limited time offer!

The value of linear programming techniques in evaluating possible solutions is clear, particularly in that it quickly provides clues of other options to consider such as adding additional Engine Assembly Capacity.

Without an increase in sales, discontinuing Model would only result in increasing the fixed costs for Model without increasing the revenue. Mark Ferguson, President From: Since it was the specific request of the president, the impact of discontinuing Model was evaluated.

### Merton Truck Co | Free Essays –

This is just a sample. In order to evaluate any alternative, we need to compare to current profit. In the optimal solution, there are limitations in both Engine Assembly and Metal Stamping. Once the relevant range of all the constraints was determined, the extreme points were clearly identified. This is due to a failed integration of cae accepted goals with …. In a similar fashion, the ability to use Model Assembly for Model would also drastically change the impact of discontinuing Model Also, only one variable or department can be increased.

Many of the values were in accordance with expectations as they corresponded to solutiob earlier analyses. There are several other options that Merton did not consider.

Based on the capacity information, it was determined that Model would require 0. However, since the bottleneck is the Model Assembly, additional capacity remains to produce Model units: We use cookies to give you the best experience possible. Renting capacity from an outside supplier was one alternative, but a similar option would be to simply outsource at a rate less than the shadow prices discussed earlier.

Selling Price od Model truck: Technology could also play an important role in reducing the time and costs needed to produce the vehicles, so it is important that Merton maintain a watchful truc, on new msrton methods and machinery.

If Merton can rent capacity for less than the shadow price for either department, it should. If both are modified, the shadow prices may no compant hold true.

Home Papers Merton Truck Co. Merton also has the option of increasing engine capacity by 2, hours using overtime. M in monthly fixed overhead exists regardless of the product mix and does not need to be allocated on a per unit basis to determine overall profit or financial performance.

Therefore, Merton should not assemble engines on overtime under these conditions.

## Merton Truck Co

Capacity Options Given the capacity limitations seen thus far, it is a fair conclusion that increasing capacity may present an opportunity. Get mertin essay sample written according to your requirements Urgent 3h delivery guaranteed Hire Writer. It can be reasonably estimated that labor hours per vehicle will be reduced due to learning curves which result from solutiin experience and familiarity with the production processand that Merton will therefore be able to increase the total volume of vehicles produced.

Mertln 2 shows the graph, including the values in USD obtained when the extreme points are plugged into the equation. This is a phenomenon known as the death spiral, when the discontinuation of a seemingly unprofitable product causes otherwise profitable products to become unprofitable. In the current analysis, it is assumed that Model Assembly cannot be used for Modela logical assumptionsince Merton specifies the department where Model will be made.

So far an improved product mix has not been identified, so linear programming was used to identify the production mix that would maximize profits using the following objective function: The impact of making only Compny was evaluated by determining the capacity solutlon Table A: The Martinez Company has decided to introduce a new product and would like to evaluate the costs of manufacturing through capital intensive and labor intensive manufacturing methods to determine which …. In addition, technologies can help reduce the costs of designing, developing, and manufacturing a product which can help the firm to improve product quality and to charge a higher price.

It is also mentioned that at present, demand is great enough that the company is selling everything it produces. As seen in Exhibit 8, Solver has determined that overtime should be utilized to produce additional units of Model If it is much greater, Merton should consider raising its prices to reduce demand.

Merton should continue to use that extra capacity to produce Model to generate additional revenue and help absorb costs. Merton Truck Company Linear programming techniques can be used to not only determine the best production mix, but also to provide clues and data suggesting ways to improve profits. Therefore, fixed overhead was not considered until the end of each evaluation.

The first step was to determine the capacity of producing only Modelwhich is as follows based on Table A: The values for contribution margin CM are given as well as the portion of departmental capacity required to produce Ferguson Foundry Limited Pages: March 10 To: However, fixed OH has not been included in the calculations until afterwards as it does not impact the optimal solution, only the net profit.

The optimal product mix for Merton given their current product mix and constraints has been determined, but Merton is also considering the addition of a new Model The first step is to calculate …. If demand is expected to continue, Merton should also evaluate the ROI of investing in capital and permanently increasing capacity as an alternative to renting or outsourcing capacity.

As the Model and life cycle continues, the company should see a reduction in time and costs associated ith every aspect of the truck manufacturing process as a result of learning curves. Merton should also consider the impact that learning curves and technology may have on their production process.