Business Report

Posted: August 29th, 2013





Business Report


Northern Hi-Tec Electronics Ltd. production problem

The production process for Northern Hi-Tec E. Ltd, is rather complex because the company engages in the production of several components. Each of the components has variable production costs and time taken in production. This is further complicated by the fact that the components have different sales values. All this decision variables and their constraint have to be taken into account in order to ensure the company runs at optimal profitability. The analysis of a linear programming model on the production and sales processes of the company will lead to the detection of the operational standards for optimal profitability (European Commission, Directorate-General for Agriculture, 2001).

On careful analysis of the production information for Northern Hi-Tec E. Ltd, the company should take the following considerations in order to maximize their profits. After taking into account the profitability ratios of the components produced by Northern Hi-Tec E. Ltd, i.e. the; internal modems, external modems, circuit boards, CD drives, hard disk drives, and memory boards, the component with the highest contribution per unit (profit margin), is the circuit board. This means that if the company wants to operate at optimal profitability, the company should ensure that it produces more of the circuit boards. On the other hand, the component with the lowest profit margin is the hard disk drive. However, every component has a significant profit margin. With this in mind, it would not harm the company to ensure that all the components are in steady supply to the consumers since their production will generally lead to profitability. Even if it is advisable to specialize in the most profitable component, it is also prudent that the company remains relevant in the market by ensuring the customers get everything under “one roof” (Erjavec, 2007).

However, the profit margin is not the sole indicator of profitability. This leads to the analysis of other decision variables that affect the net profit realized by the company. Such variables include the testing procedures carried out by the company on each of the components. Testing is a very important aspect in production as it ensures that only the quality and reliable products reach the consumer. The decision variables taken into account are the varying labor costs for the test devices, time taken by the test devices for testing each of the individual components and the weekly availability hours of the test devices (Ball, Fanfani, & Gutierrez, 2010).

From the company statistics, it is evident that the memory board is the component requiring the longest duration in testing through all the four test devices. On the other hand, the CD drive is the component requiring the least duration in testing through the four test devices. This means that if the company is to increase the number of units produced, regardless of the type of component is best to produce more of the CD drives in comparison to the memory board. However, this will only affect the quantity on units produced as per a given duration but not the net profit realized by the company (Ackrill, 2000).

The labor costs incurred on each of the test devices is crucial decision variable to be considered if the company is to run under optimal profitability. When this decision variable is taken into account, it is realized that there are some components requiring higher testing charges as opposed to others. The CD drive and the memory board lead the company into incurring high testing charges in comparison to the other components. This means that if the company is more interested in making pure profits as opposed to increasing the rate of production, the company is should concentrate more on the components that incur the company the least test charges, such components include, the internal modem and the external modem.

When taking into consideration the constraints facing the production company, the analysis was on the variables that affected the production of the various components produced by the firm. The focus was set on the viability of firm as opposed to the variables that hinder the future production processes of the company. This is important in ensuring the company runs at a profit and at optimum level in this respect. Several constraints bedevil Northern Hi-Tec E. Ltd., in the production of internal modems, external modems, circuit boards, CD drives, hard disk drives, and memory boards (George, and Mukund, 1997).

One such constrain is the availability of the test components. As seen above, the company must carefully test each of the components produced before its release into the market. Examination of the company’s production information reveals that the test devices are not always readily available for use. This hampers production since production is restricted by the availability of the test devices. This is because testing is a necessary process in production (The Cobb Group, 1994).

Test devices availability ranges from test device one, which is available for use for one hundred and fifty hours pre week, to test device four, which is available for use for the shortest duration of one hundred and two hours each week. After this consideration, the company is therefore restricted in its production of components such as the internal modem and the external modem, which require more time while testing with the test device four. This constraint works against the profitability of the company because as discussed earlier, it was realized that in order to minimize on the testing costs and hence increases the profits, the company should increase its production of the internal and external modems. However, this cannot be realized since these components require more time on the test device four (Frederick, & Gerald, 1995).

Northern Hi-Tec E. Ltd, therefore has the task of ensuring that the production of the various is done in the specified proportions in order for the company to run into optimum profitability. Although, the abandoning of some of the least profitable products while concentrating on the most profitable components would lead the company into making maximum profits, this direction would not be viable in the long run since the components are interrelated in some way. Some of the components create market for the others, when the company produces all the products, the company is therefore able to reach whole markets (George, 1963).


The consultant dietician is faced with a rather multifaceted situation involving the prudent design and structuring of a client’s diet. This process is complicated by having several decision variables that have to be taken into account. These variables are mainly the cost of the designed diet and the nutritional competence of the designed diet. This is further complicated by the fact that the components have different cost values. All the decision variables and their constraints have to be taken into account in order to ensure the dietician provides the clients with the faultless and effective nutritional advice. The analysis of the linear programming model on the daily nutritional requirements and their costs at their minimum will lead to the detection of the relevant daily nutritional requirements at a minimum cost (Wasserman, 2010).

In order for the client to ensure, the client meets the daily nutritional requirements and at minimum cost, careful analysis of the decision, variables were taken into account. The decision variables for this particular situation are the daily nutritional requirements and the cost of the dietary intakes. The daily nutritional requirements are pertinent because they must be considered for the client to have a healthy dietary intake. The cost of the dietary intake is important because it involves the purchasing ability of the client (Stoll-Kleemann, & Welp, 2006).

The optimal solution for this case is the resultant minimal cost figure that satisfies the daily nutritional requirements. In order to attain this figure the decision variables are first taken into account. These are the number of brownies taken by the client daily, the number of chocolate ice  cream taken by the client daily, the daily number of cola sodas taken by the client and the daily number of pineapple cheese-cake taken by the client (Finkenflügel, 2004).

The above decision variables are constrained by the required dietary intake. The constraints are the required daily calorie intake, the daily chocolate intake, the daily sugar intake and the daily-required fat intake. These constraints restrict the minimum and maximum decision variables. A surplus on any of the above dietary requirements would render the client overweight over time whereas the slack on the above dietary requirements would render the client malnourished over time. This situation is to be avoided if the consultant dietician is to remain effective in his or her field of practice (Lawrence, & Weber, 2008).

The options open to the consultant dietician are restricted to brownies, chocolate ice cream, which is served in the form of scoops, cola soda that is to be taken in bottles, and pineapple cheese-cake, which is to be served in the form of pieces. These could be taken as some of the constraints. However, it is evident that the chocolate ice cream could provide the required ice cream, the brownies could also be served in place of the chocolate cake, and the cola could be taken as the available soda whereas pineapple cheesecake is served as the required cheesecake.

From the answer report, it can be deduced that the minimum required amount of calories and minimum required amounts of chocolate in grams, sugar in grams and fat in grams can be provided by having the client take the following diet. The client’s diet should comprise of at least five pieces of brownies, two scoops of chocolate ice cream, one bottle of cola soda and three pieces of pineapple cheesecake. It is not a necessity to calculate the allowable increases since the diet is designed at the minimum cost. The pursuit of this designed diet will have the consultant dietician provide the effective and required diet and nutritional advice to the client.


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