Question 19

This linear programming problem can be solved graphically or algebraically.

 The objective function maximizes the contribution margin: $110R + $175D.

 The constraint function for assembly is: 3R + 4D < 12,000.
 The constraint equation for testing is: 2.5R + 1.5D < 6,000.

Accordingly, at most the units that can be assembled is:

 4,000 units of the Regular model (12,000 hours x 3)

 3,000 of the Deluxe model (12,000 hours x 4)

Moreover, at most the units that can be tested is:

 2,400 units of the Regular model (6,000 hours x 2.5)

 4,000 units of the Deluxe model (6,000 hours x1.5)

Hence, two feasible solutions are to produce either:

 2,400 units of the Regular model and none of the Deluxe model
 3,000 units of the Deluxe model and none of the Regular model

Why 2,400 units of Regular model? Because 4,000 units of regular model would
require 10,000 testing hours which exceeds the 6,000 limit.

Why 3,000 units of Deluxe model? Because 4,000 units of deluxe model would
require 16,000 assembly hours which exceeds the 12,000 limit.

Hint: Therefore choice A and B is obviously wrong because it violates the constraint.

Regular Deluxe Max. Hour

CM 110.00 175.00
Assembly 3 hours 4 hours 12,000 hours
Testing 2.5 hours 1.5 hours 6,000 hours
Total Hours 5.5 hours 5.5 hours

CM / hour 20.00 31.82

Since Deluxe model offers the highest contribution margin per hour. Hence, produce
the maximum number units of Deluxe model of 3,000 units to produce the maximum
profit.
Proof

Choice C 1,091 units 2,182 units CM

21,820.00 69,427.27 91,247.27
(1,091 * 20) (2,812 * 31.82)
Choice D 3,000 units 95,454.55

A third feasible solution is the intersection of the constraint functions, adjusted to state
equalities and solved simultaneously.

Question 25

The relevant contribution margins per machine hour are Product A $18.50 and Product
B $16.00 as shown below.

Product A: $100 - $53 - $10 = $37 ÷ 2 hours = $18.50

Product B: $80 - $45 - $11 = $24 ÷ 1.5 hours = $16.00

Since Product A has the highest contribution margin per hour, produce the annual unit
demand of Product A of 10,000 units, the remaining machine hours after producing
Product A will be allocated to Product B. Hence:

Product
A B Total
Units to Produce 10,000.00 13,333.00 23,333.00
Machine Hours 20,000.00 20,000.00 40,000.00
CM / Unit 37.00 24.00
CM Dollar 370,000.00 319,992.00 689,992.00