From the book Managerial Uses of Accounting Information by Joel S. Demski from 2008.

Chapter 11 q. 9

9. accounting library and decision frame Ralph's Library is a two product firm. Quantities of the two products are denoted qi and q2. Ralph has studied the situation, and decided to rely on the following LLAs DL = 90q1 + 95q2 DM = 50q1 + 100p direct labor cost direct material cost first overhead pool second overhead pool selling and adm Vi = 400.000 + 3(DL) = 200.000 + 1 (DM); S&A = 700, 000 + 10g1 + 20g2 In addition, Ralph estimates total revenue via TR = 860q1 960g2. Ralph also faces capacity constraints. Machine hours are limited in each of two departments to a total of 6,000. (Each department has a capacity of 6,000 machine hours.) Machine hour requirements are as follows: product 1 product 2 department one department two So, for example, a unit of the first product requires one machine hour in department one and two machine hours in department two (a) Determine Ralph's optimal output and associated maximum profit