BUS 220 Study Guide - Midterm Guide: Sensitivity Analysis, Shadow Price

• School: Stony Brook University
• Department: Business Management
• Course: BUS 220
• Professor: Jadranka Skorin- Kapov

Document Summary

Variables: x1 = number of b&w ads to make. X2 = number of color ads to make. Cost = production + airing for b&w and color. Profit = 5,200(25)x1 - 8,000x1 - 2,200(25)x1 +9,000(25)x2 - 12,000x2 - 4,000(25)x2. 2,200(25)x1 + 4,000(25)x2 <= 900,000 x1, x2 are nonnegative: enter data into excel and solve the problem using the solver option. Save the answer and sensitivity reports: answer the following sensitivity questions. A1: ,000 is in the allowable range for changes in the rhs of the 1st constraint, so shadow price for the 1st constraint is valid. 10,000*3. 46=,600. (i. e. the profit will increase for ,600) A2: current profit coefficient for b&w ads is ,000. Since the allowable decrease is 4,850, decrease of. That means that the optimal values of the variables (i. e. x1=8. 571, x2=4. 286) will not change. However, the optimal value of z will change.