Solve linear Programming Problem: (Computer required.) Golden Company management wants to maximize profits on its three products. Ooh. Ahh. and Wow. The following information is avail- able from the company accounting records: 

Analysis of selling and administrative costs indicates that 50 percent of those costs vary with sales. The remaining amount is fixed at $90.000. Manufacturing overhead costs are based on machine-hours. A regression equation was computed based on the past 30 months of cost data. The equation was:

OVH $285.000 + $.35 MHR where OVH=Overhead MHR=Machine-hours The regression equation had an overall /^-square of .85. Each Ooh requires .8 machine-hours. Each Ahh and Wow requires 1.2 machine-hours. Each product requires usage of limited facilities. These time requirements in hours for each unit are:

There are 125,000 hours available in preparation: 85,000 hours available in molding; and 70,000 hours available in finishing.

Required:

a. Formulate the above as a linear programming problem.

b. Solve the problem and compute the profit at the optimal product mix.

Transcribed Image Text:

Ooh Ahh Wow $9 $8 $12 Sales price Manufacturing costs: Direct materials Direct labor Overhead Selling and administrative costs Profit per unit 32313 12311 23211 $ 3 $1