1 Normal 1 No Spac... . Heading 1 Paragraph Styles 6 CJL operates two paper mill
ID: 2342480 • Letter: 1
Question
1 Normal 1 No Spac... . Heading 1 Paragraph Styles 6 CJL operates two paper mills: Mill 1 [M1] has a capacity of 20,000 tonnes and Mill 2(M2)-30,000 tonnes and they currently have three Newspaper customers NA, NB NC. The current demand from these customers are NA -12,000, NB-20,000 & NC 16,000 tonnes. There are other suppliers of paper who will quickly fill any demand from these Newspaper customers if CJL fails to deliver or if it increases its price. The controller of CJL is looking at last month's shipping costs of $1,512,000 and identified that the cost of shipping newsprint was increasing thereby threatening the profitability of the business; it was therefore agreed that the only feasible resolution to this problem is to reduce the monthly cost of shipping and this has to be done without affecting delivery schedules to customers Shipping costs are as follows: From Milll to NA-costs $$20/ tonne to NB-$28/tonne &to NC-$40/ tonne. From Mill 2 to NA $40/tonne to NB $$36/tonne & to NC-$32/tonne It was decided that the solution to the problem would be to ship only the maximum from each factory in such a manner that it minimizes the costs of shipping. REQUIRED; 1. Write a brief paragraph explaining the financial objectives of CJL and the problem they are experiencing in meeting th specific financial objectives. I 2. List the factors, and or functions of the business and the constraints that exists for each 3. Express the constraints in financial terms 4. Suggest a formulae that would be used to resolve the problems and satisfy the objectives of CJLExplanation / Answer
Q 1: The financial objective:
The financial objective of CJL is to Maximise their profitability, by meeting current demand from the three customers i.e NA, NB and NC. But the increasing shipping costs of newsprint, is posing a threat to achieving this specific objective.
Q 2: Function of the business and constraints:
The sole function of the businessis to supply news papersto its three regular customers in a sustainable basis, by meeting their current demand for these papers.
The constraints are:
a) The threat of competition that exists from the other suppliers, if the existing demand
from the three customers, NA, NB and NC is not met.
b) Increasing costs of shipping news print
Q 3: Expression of constraints in financial terms:
a) Threat of competition = loss of demand of 48,000 tonnes from three customers
b) Total shipping costs:
From Mill 1 to NA (12,000 X $ 20 )+ from Mill 1 to NB (8,000 X $28 )+ from Mill 2 to NC
(16,000 X $32) = $2,40,000 + $ 2,24,000 + $ 5,12,000 = $ 9,76,000. This is the least shipping
costs CJL has to incure to meet the demand of the three customers.
Q 4: Formulae to resolve the problem and satisfy the objective of CJL:
Last month shipping costs were $ 1,512,000. If we follow the current shipping costs and the policy of shipping maximum from that mill to Customer where shipping costs will be least, we can supply 12,000 units from Mill 1 to NA, 8,000 units to NB and 16,000 units from Mill 2 to NC. This will minimise the shipping costs to $ 9,76,000 and this will result in a saving in shipping costs as $ 1,512,000 - $ 9,76,000 = $ 5,36,000.
If they follow this policy CJL will save in costs by $ 5,36,000.
*************************
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.