Maria Jones has just earned a university degree in management. She has taken the position of assistant to the president at Roseville Engineering, which manufacturers tungsten carbide drill steels for the gold mining industry.

Roseville Engineering manufacturers two types of drill steels. One has a steel rod of 3/4-inch diameter and the other a diameter of 1inch. The manufacturing takes place in three departments. In the tip-fabricating department, tungsten carbide tips are manufactured from powered - wolfram. In the steel-forging department, the steel rods are slotted and prepared for the insertion of the tips. The assembly department puts the tips and steel rods together in a brazing process. Each department has two severe general capacity limits. The first constraint prohibits further capital expenditure because of a very weak liquid position arising from past losses; the second is the local labor situation, which makes the hiring of more labor, or using overtime, virtually impossible. The capacity of each department is as follows:

Tip fabricating (Dept. A) 200,000 hours

Steel forging (Dept. B) 275,000 hours

Assembly (Dept. C) 350,000 hours

The treasurer has just completed the budget for the forthcoming year. Because of the renewed confidence in gold, the company is expected to operate at full capacity. The treasurer has produced the following profit analysis of the two products, on which a major production decision was based:

-INCH 1- INCH Selling price $60.00 $70.00 Flexible Costs Tungsten carbide 2.00 3.00 Steel 3.00 4.00 Department A Labor 5.00 4.00 Department B Labor 8.00 12.00 Department C Labor 7.50 5.00 Flexible other factory 4.00 6.00 & selling Committed Costs Committed factory 19.00 22.00 & selling Total costs 48.50 56.00 Profit $1 1.50 $14.00Sales are expected to occur evenly through- out the year. A JU -INCH 1-INCH Sales (in units) 200.000 233.333 Sales (in dollars) $12,000,000 $16,333,310 Flexible costs 5.900.000 7.933.322 Committed costs 3.800.000 5,133.326 Total costs 9.700,000 13,066,648 Profit $2,300,000 $3,266.662