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Exhibit 4.1
The following questions are based on the problem below and accompanying Analytic Solver Platform sensitivity report.
Carlton construction is supplying building materials for a new mall construction project in Kansas. Their contract calls for a total of 250,000 tons of material to be delivered over a three-week period. Carlton's supply depot has access to three modes of transportation: a trucking fleet, railway delivery, and air cargo transport. Their contract calls for 120,000 tons delivered by the end of week one, 80% of the total delivered by the end of week two, and the entire amount delivered by the end of week three. Contracts in place with the transportation companies call for at least 45% of the total delivered be delivered by trucking, at least 40% of the total delivered be delivered by railway, and up to 15% of the total delivered be delivered by air cargo. Unfortunately, competing demands limit the availability of each mode of transportation each of the three weeks to the following levels (all in thousands of tons): The following is the LP model for this logistics problem.
-Refer to Exhibit 4.1. Should the company negotiate for additional air delivery capacity?
Unit Product Cost
The total cost to produce one unit of product, including direct materials, direct labor, and a portion of all overhead costs.
Variable Costing
A system in accounting that considers solely the changing costs associated with production (direct materials, direct labor, and variable manufacturing overhead) in the calculation of product prices.
Net Operating Income
Net Operating Income, often abbreviated as NOI, is a financial metric that calculates a company’s profit after subtracting operating expenses excluding taxes and interest.
Absorption Costing
Absorption costing is an accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.
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