The Cleveland Stapler Manufacturing Company

Make or buy decision using Excel Solver

The Cleveland Stapler Manufacturing Company forecasts a 5,000-unit demand for its SH model during the next quarter. This stapler is assembled from three major components: base, staple cartridge, and handle. Until now Cleveland Stapler has manufactured all three components. However, the forecast of 5,000 units is a new high in sales volume, and the firm doubts that it will have sufficient production capacity to make all the components. It is considering contracting a local firm to produce at least some of the components. The production-time requirements per unit are given in the Excel data sheet. After considering the firm’s overhead, material, and labor costs, the accounting department has determined the unit manufacturing cost for each component. These data, along with the purchase price quotations by the contracting firm are given in the Excel data sheet. Formulate a linear programming model for the make-or-buy decision for Cleveland Stapler that will meet the 5,000-unit demand at a minimum total cost.

Cost Data for Stapler
Component
Manufacturing Cost ($)Purchase Cost ($)
Base
0.75
0.95
Cartridge
0.4
0.55
Handle
1.1
1.4 Production Data for Stapler
Production Time (hours)
Department
Base
Cartridge
A
0.03
B
0.04
C
0.02 0.02
0.02
0.03 Handle
Total Department Time Available (hours)
0.05
400
0.04
400
0.01
400 me Available (hours)