A. Ted is trying to convince Katherine not to produce any velvet shirts since the demand for this fashion fad is quite low. He argues that this fashion fad alone accounts for $500,000 of the fixed design and other costs. The net contribution (price of clothing item - materials cost - labor cost)) from selling the fashion fad should cover these fixed costs. Each velvet shirt generates a net contribution of $22. He argues that given the net contribution, even satisfying the maximum demand will not yield a pro?t. What do you think of Ted's argument ? Formulate and solve a linear programming problem to maximize pro?t given the production, resource, and demand constraints. Before she makes her final decision, Katherine planes to explore the following question independently except where otherwise indicated. C. The textile wholesaler informs Katherine that the velvet cannot be sent back because the demand forecasts show that the demand for velvet will decrease in the future. Katherine can therefore get no refund for the velvet. How does this fact change the production plan ? What is an intuitive economic explanation for the difference between the solutions found in parts b and c ? The sewing staff encounters difficulties sewing the arms and lining into the wool blazers since the blazer pattern has an awkward shape and the heavy wool material is difficult to cut and sew. The increase labor time to sew a wool blazer increases the labor and machine cost for each blazer by $80. Given this new cost, how many of each clothing item should TrendLines produce to maximize profit? The textile wholesaler informs Katherine that since another textile customer canceled his order, she can obtain an extra 10,000 yards of acetate. How many of each clothing item should TrendLines now produce to maximize profit? TrendLines assumes that it can sell every item that was not sold during September and October in a big sale in November at 60 percent of the original price. Therefore, it can sell all items in unlimited quantity during the November sale. (The previously mentioned upper limits on demand concern only the sales during September and October. What should the new production plan be to maximize profit?
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