A machine tool manufacturer is planning an expansion program. Up to 10 workers c

Question

A machine tool manufacturer is planning an expansion program. Up to 10 workers can be hired and assigned to the five divisions of the company. Since the manufacturer is currently operating with idle machine capacity, no new equipment has to be purchased. Hiring new workers adds $250/day to the indirect costs of the company. On the other hand, new workers add value to the company’s output (i.e., sales revenues in excess of direct costs) as indicated in Table E11.6. Note that the value added depends upon both the number of workers hired and the division to which they are assigned.

The company wishes to hire workers so that the value that they add exceeds the $250/day in indirect costs. What is the minimum number of workers the company should hire and how should they be allocated among the five divisions?

Table El1.6 Value added by new workers New workers Division DivisionDivioDivision Division (rn) Increase in contribution to overhead S/day) 2 2 32 60 28 53 50 78 97 115 6 131 7 144 108 124 138 140 150 154 110 120 128 135 140 144 10 113 133 146 153 158 161 162 91 109 127 145 160 170 172 154 160 163 10

Explanation / Answer

the company should hire 3 workers and they should be allocated to division 1,3 and 4 for maximum output.

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