BUS107: Racer Maker produces and sells toy racing cars that resemble machines used in Formula One races.: (Online) Quantitative Methods Assignment, SUSS, Singapore

Question 1

Racer Maker produces and sells toy racing cars that resemble machines used in Formula One races. The new GM of Racer Maker has asked you as the Production Manager to plan production for the last three months of the year. He has also emphasized the need for minimization of the production costs involved.

The Marketing Manager gave you the demand forecasts for 3 popular toy racing cars sold by Racer Maker, viz: Ferrari, Maserati and Williams. They are presented in the table below:

Your production supervisor also gave you the following key information regarding the required production resources for this planning period. These are presented in Table 2 below:

Other key information gathered by your production supervisor includes the following to assist you in optimizing the cost of production. These are presented in the following tables:

You intend to use Linear Programming to determine the minimum cost of production.

Your GM later expressed confidence at securing a cheaper source of raw materials for the production of Ferrari and Maserati toy cars for the period of October. He would like you to consider lowering the unit cost of production for the Ferrari and Maserati toy cars for October by $2 each. He requested you to provide him with information on the improvement in the optimal production cost.

Based on the given information:

(a) Develop a linear programming (LP) model to minimise the production costs of Racer Maker for the planning period of October to December. Your model must be in the form of algebraic equations and inequalities where appropriate. State your assumptions in constructing your LP model (Note: Your assumptions must be specific to the LP problem)

(b) Solve the LP model using the Excel Solver and present your Answer and Sensitivity Reports. Interpret the terms “Binding” and “Not-binding” indicated in your Answer Report by referring to the appropriate decision variables.

(c) Without using the Excel Solver, determine the lower cost of production from purchasing the raw materials from a cheaper source for the October production and inform the GM the cost improvement accordingly. Explain the reason(s) for applying your method of calculations.

Question 2

Advanced Micros, a retailer in computer equipment, accessories, and gadgets was established about 5 years ago. Since its inception, the organization has now 3 fairly large sales outlets in the north, east, and west of Singapore.

The owners of Advanced Micros have plans to expand the organization’s presence in other parts of Singapore, notably in larger malls with heavier human traffic. They recently recruited you as their Marketing Manager to help improve sales of Advanced Micros. You reckon that a trend analysis of sales and the number of customers patronizing Advanced Micos’ retail outlets is one of your priority tasks and have requested your sales executive Chris to retrieve data on the total number of customers patronizing Advanced Micros shops over the last four years. Chris presented to you the following data arranged in chronological order:

(a) Identify the appropriate forecasting method to analyze the above monthly data on the total number of customers patronizing the retail outlets of Advanced Micros. Provide justifications for the method of analysis chosen.

(b) Determine the forecasts for the total number of customers for the next 6 months of Year 5.

You are required to show clearly the essential steps and working details in your
computations of the forecasts with three (3) appropriate sample calculations of key components of your forecasting method. All computations should be rounded up to 4 decimal places.

(c) Discuss three (3) limitations that could cause forecasting inaccuracies in your analysis.