Fiordi-Ligi Srl assembles and sells two products: printers and desktop computers. Customers can purchase either (a) a

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Fiordi-Ligi Srl assembles and sells two products: printers and desktop computers. Customers can purchase either (a) a computer, or (b) a computer plus a printer. The printers are not sold without the computer. The result is that the quantity of printers sold is equal to or less than the quantity of desktop computers sold. The contribution margins are €200 per printer and €100 per computer.

Each printer requires 6 hours assembly time on production line 1 and 10 hours assembly time on production line 2. Each computer requires 4 hours assembly time on production line 1 only. (Many of the components of each computer are preassembled by external suppliers.) Production line 1 has 24 hours of available time per day. Production line 2 has 20 hours of available time per day.

Let X represent units of printers and Y represent units of desktop computers. The production manager must decide on the optimal mix of printers and computers to manufacture.

Required

1 Express the production manager's problem in an LP format.

2 Which combination of printers and computers will maximise the operating profit of Fiordi-Ligi? Use both the trial-and-error and the graphic approaches.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Related Book For  book-img-for-question

Management and Cost Accounting

ISBN: 978-1405888202

4th edition

Authors: Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, George Foster

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