33:136:386 Study Guide - Midterm Guide: Shadow Price, Spreadsheet, Sensitivity Analysis

• School: Rutgers University
• Department: Business Analytics and Information Technology
• Course: 33:136:386
• Professor: Ely, Romulo

Document Summary

Break-even analysis: number of units (volume) to sell/produce that will equate total revenue with total cost: vp = tc = fixed cost + variable cost, profit = total revenue total cost. Sensitivity analysis: how sensitive a management model is to changes: changes in sensitivity analysis: Changing objective function parameters: changes slope of objective function, new optimal point. Changing constraint constant values: same slope, moves line up/down. Adding new constraints: further limiting feasible area. Adding new variables: sensitivity range: (for an objective function coefficient) is the range of values over which the current optimal solution point will remain optimal, shadow price: marginal value of one additional unit of a resource. The sensitivity range for a constraint quantity value is also the range for which the shadow price is valid. If we change the constraint quantity to a value outside the sensitivity range for that constraint quantity, the shadow price will change.