Telsla produces a range of electric car models. The following presents hypothetical information in regards to the production of these cars. The production manager would like your assistance to identify the optimal production mix. Below is an estimation of the costs to manufacture these products. Model S Model 3 Model X Selling price $130,000.00 $63,000.00 $150,000.00 Direct materials $60,000.00 $26,000.00 $67,000.00 Direct labour $17,500.00 $11,500.00 $20,750.00 Variable overhead $13,125.00 $8,625.00 $15,562.50 Fixed overhead $8,750.00 $5,750.00 $10,375.00 Each of these products goes through the same manufacturing process. The time for each process required for each model and the total hours available for each process are provided in the table below. Process Model S Model 3 Model X Total hours available Body 2 1.5 2.5 750,000 Stamping 1 0.75 1.2 400,000 Plastics 2 1.75 2.1 700,000 Assembly 4 3.5 4.5 1,400,000 Required: Using Excel Solver, formulate a linear program to determine the optimal production mix which ensures that the maximum contribution margin is obtained. Discuss the key features of your results and why these were considered to be the optimal result. Discuss and suggest three possible ways in which the firm could improve the contribution margin in light of the above Solver analysis. Provide financial information to support your recommendations and clearly illustrate how your proposals impact the production mix and the firm's contribution margin. Utilise relevant tables/charts/figures to illustrate the comparative results under each of your options.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

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Telsla produces a range of electric car models. The following presents hypothetical information in regards to the production of these cars. The production manager would like your assistance to identify the optimal production mix. Below is an estimation of the costs to manufacture these products.

	Model S	Model 3	Model X
Selling price	$130,000.00	$63,000.00	$150,000.00
Direct materials	$60,000.00	$26,000.00	$67,000.00
Direct labour	$17,500.00	$11,500.00	$20,750.00
Variable overhead	$13,125.00	$8,625.00	$15,562.50
Fixed overhead	$8,750.00	$5,750.00	$10,375.00

Each of these products goes through the same manufacturing process. The time for each process required for each model and the total hours available for each process are provided in the table below.

Process	Model S	Model 3	Model X	Total hours available
Body	2	1.5	2.5	750,000
Stamping	1	0.75	1.2	400,000
Plastics	2	1.75	2.1	700,000
Assembly	4	3.5	4.5	1,400,000

Required:

Using Excel Solver, formulate a linear program to determine the optimal production mix which ensures that the maximum contribution margin is obtained. Discuss the key features of your results and why these were considered to be the optimal result.
Discuss and suggest three possible ways in which the firm could improve the contribution margin in light of the above Solver analysis. Provide financial information to support your recommendations and clearly illustrate how your proposals impact the production mix and the firm's contribution margin. Utilise relevant tables/charts/figures to illustrate the comparative results under each of your options.

Ensure that your answers for the above are discussed and supported by relevant calculations/workings.

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