= 7

Here, A and B represent the days of operation per week for each mine; SH, SM, and SL represent excess production of high-, medium-, and low-grade ore, respectively; and SA and SB are days per week that each mine is not operated.

A graphic representation of the linear programming problem was also provided. The graph suggests an optimal solution at point X, where constraints 1 and 2 are binding. Thus,

Substitute A = 2 into the high-grade ore constraint:

A minimum total operating cost per week of $50,000 is suggested, because

Total Cost = $10,000A + $5,000B = $10,000(2) + $5,000(6) = $50,000

Idaho Natural Resources, Ltd., (INR) LP Graph

Days of operation of mine A

Idaho Natural Resources, Ltd., (INR) LP Graph

Days of operation of mine A

The consultant's report did not discuss a variety of important long-run planning issues. Specifically, INR wishes to know the following, holding all else equal:

A. How much, if any, excess production would result if the consultant's operating recommendation were followed?

B. What would be the cost effect of increasing low-grade ore sales by 50%?

C. What is INR's minimum acceptable price per ton if it is to renew a current contract to provide one of its customers with 6 tons of high-grade ore per week?

D. With current output requirements, how much would the cost of operating mine A have to rise before INR would change its operating decision?

E. What increase in the cost of operating mine B would cause INR to change its current operating decision?

ST9.1 Solution

A. If the consultant's operating recommendation of A = 2 and B = 6 were followed, 32 tons of excess low-grade ore production would result. No excess production of high- or mediumgrade ore would occur. This can be shown by solving for SH, SM, and SL at the recommended activity level.

From the constraint equations, we find the following:


6(2) +


- SH =

Was this article helpful?

0 0
Your Retirement Planning Guide

Your Retirement Planning Guide

Don't Blame Us If You End Up Enjoying Your Retired Life Like None Of Your Other Retired Friends. Already Freaked-Out About Your Retirement? Not Having Any Idea As To How You Should Be Planning For It? Started To Doubt If Your Later Years Would Really Be As Golden As They Promised? Fret Not Right Guidance Is Just Around The Corner.

Get My Free Ebook

Post a comment