Question 1

The two inequality functions above are:

Accepted Answer

The two inequality functions are describing constraints on resources, which makes them resource constraints.

Question 2

The machine-hour constraint for Harrington's linear program is:

Accepted Answer

The question states that there is a machine-hour constraint, and the only option that includes machine-hours is option B, which specifies 2B machine-hours needed for each unit of product B produced. Therefore, option B is the best choice.

Question 3

The shadow price in a linear programming model is:

Accepted Answer

The shadow price represents the maximum value that a decision-maker would be willing to pay for an additional unit of a scarce resource in order to increase the objective function value. Therefore, option C is the correct answer. Option A is incorrect because the shadow price can be useful in determining the value of a resource in a market. Option B is incorrect because the shadow price is not necessarily equal to the current market price, as it reflects the impact of the scarce resource on the objective function. Option D is incorrect because the shadow price can be equal to or less than the market price. Option E is incorrect because a binding constraint has a positive shadow price.

Question 4

The direct labor-hour constraint for Harrington's linear program is:

Accepted Answer

The direct labor-hour constraint is the constraint that limits the amount of direct labor hours available. This is given as 2A + 2B + 3C ≤150 in the options, hence the correct answer is E.

Question 5

The best way to allocate scare resources to attain a specific objective, such as the maximization of operating income, is:

Accepted Answer

Linear programming is a mathematical technique used to determine the optimal allocation of resources given certain constraints and objectives. It can be used to maximize operating income by identifying the mix of products that will generate the highest profit, subject to constraints such as limited production capacity, labor hours, and materials. Linear programming is a powerful tool for resource allocation and can lead to significant cost savings and increased profitability.

Question 6

In situations when management must decide on accepting or rejecting one-time-only special orders, where there is sufficient idle capacity, which one of the following is not relevant to the decision?

Accepted Answer

Absorption costs are not relevant to the decision because they include fixed overhead costs, which have already been incurred regardless of whether the special order is accepted or not. Only differential, direct, variable, and incremental costs should be considered when making a decision on a one-time-only special order, as they are the costs that will be directly affected by accepting or rejecting the order.

Question 7

Quinta Inc. manufactures machine parts for aircraft engines. The CEO is considering an offer from a subcontractor who would provide 2,800 units of product QR128 for a price of $190,000. If Quinta does not purchase these parts from the subcontractor it must produce them in-house with the following costs:  In addition to the above costs, if Quinta produces part QR128, there would also be a retooling and design cost of $13,000. Should Quinta Inc. accept the offer from the subcontractor?

Accepted Answer

The answer of Quinta Inc. manufactures machine parts for aircraft...

Question 8

Southern Company packages and sells nuts in cans. Pecans, cashews, Brazil nuts, hazelnuts, and peanuts are packaged individually as well in combinations and mixtures. Southern wants to package the nuts so that it can maximize its operating profit while considering market demand. In addition, there are limited supplies for some types of nuts. The technique that Southern should employ is:

Accepted Answer

Southern Company needs to optimize its profit by considering market demand and limited supplies for some types of nuts. Linear programming is a suitable technique for this problem as it is used for optimizing the objective (profit) subject to constraints (demand and supply). It allows Southern Company to decide on the best mix of nuts to package, and how many units of each type of nut to package to maximize their profits.

Question 9

Which one of the following is most relevant to a manufacturing equipment-replacement decision?

Accepted Answer

The answer of Which one of the following is most...

Question 10

The above mathematical functions together constitute a(n):

Accepted Answer

The given model is a linear programming model as it involves maximizing a linear objective function subject to linear constraints.

Question 11

The cost described in situations III and V above are:

Accepted Answer

The answer of The cost described in situations III and...

Question 12

Sensitivity analysis in linear programming is used to:

Accepted Answer

Sensitivity analysis is used to determine how the optimal decision would react to changes in the parameters of the problem such as objective function coefficients or constraints. It helps in understanding the stability of the optimal solution and allows decision-makers to adjust variables in response to changes in the environment.

Question 13

The following unit cost information pertained to the trumpet division of WGN Music Co. and was based on monthly demand and sales of 100 units:  Assume that the Trumpet Division was evaluating whether or not it would accept a special order for ten trumpets at $500 per unit.
Required:
1. Calculate total relevant cost per unit.
2. Should WGN accept the special order; why or why not?

Accepted Answer

The answer of The following unit cost information pertained to...

Question 14

The point where M = 2 and S = 3 would:

Accepted Answer

The point where M=2 and S=3 would be a feasible point as it satisfies the constraints of the problem. However, without information about the objective function, it is not possible to determine whether it would minimize total cost or total variable cost, or be the optimal solution point. It could also lie in a corner, but that is not a guaranteed outcome.

Question 15

The costs described in situations I and IV above are:

Accepted Answer

The costs described in situations I and IV are relevant costs, meaning they are costs that will be affected by a specific decision and should be taken into consideration when making that decision. Prime costs refer to direct materials and labor, sunk costs are costs that have already been incurred and cannot be recovered, discretionary costs are optional and can be adjusted as needed, and opportunity costs are the benefits foregone by choosing one option over another.

Question 16

The Multi Resource Company manufactures two lines of washing machines, Regular and Deluxe. The contribution margin of a Regular model is $110 and for Deluxe Model is $175. The company has two departments, Assembly and Testing. The Regular Model requires 3 hours to assemble, while a Deluxe Model requires 4 hours. The total time available in Assembly is 12,000 hours. In the Testing Department, it requires 2.5 hours to test a Regular Model and 1.5 hours to test a Deluxe Model. A total of 6,000 hours of testing time is available. The optimum production plan for Multi Resource is:

Accepted Answer

The answer of The Multi Resource Company manufactures two lines...

Question 17

There is insufficient labor capacity in the plant to meet the combined demand for both products. Both products are produced through the same production departments. The fixed factory overhead rate is $10 per direct labor hour.
Required:
1. Calculate the unit contribution margin for each product.
2. Determine which product should be produced in priority, given the labor constraint, and explain why.arter Inc. produces two products, A and

Accepted Answer

The answer of  There is insufficient labor capacity in...

Question 18

A small company makes only two products with the following production constraints representing two machines and their maximum availability:  If the profit equation is Z = $4X + $2Y, the maximum possible profit is:

Accepted Answer

The answer of A small company makes only two products...

Question 19

Copeland Inc. produces X-547 in a joint manufacturing process. The company is studying whether to sell X-547 at the split-off point or upgrade the product to become Xylene. The following information has been gathered: (1) Selling price per pound of X-547.
(2) Variable manufacturing costs of the upgrade process.
(3) Avoidable fixed costs of the upgrade process.
(4) Selling price per pound of Xylene.
(5) Joint manufacturing costs to produce X-547.
Which of the items should be reviewed when making the upgrade decision?

Accepted Answer

To make an informed decision about whether to upgrade the product, the company needs to consider all the relevant factors. These include:
1. Selling price per pound of X-547: This is important because it determines the revenue the company can generate by selling the product at the split-off point.
2. Variable manufacturing costs of the upgrade process: This is important because it determines the additional costs the company will incur to upgrade the product to Xylene.
3. Avoidable fixed costs of the upgrade process: This is important because it determines whether upgrading the product is financially feasible. If the avoidable fixed costs are too high, the company may not be able to make a profit by upgrading the product.
4. Selling price per pound of Xylene: This is important because it determines the revenue the company can generate by selling Xylene, and therefore the potential profit from upgrading the product.
5. Joint manufacturing costs to produce X-547: This is important because it provides context for the decision. If the joint manufacturing costs are high relative to the revenue from X-547 sales, it may be more profitable to upgrade the product.

Therefore, the items that should be reviewed when making the upgrade decision are 1, 2, 3, and 4.

Question 20

Apex Manufacturing Corporation is considering a significant shift in the mix of products it manufactures. The costs associated with current and proposed production schedules are shown below by category:  The proposed production will require a one-time purchase of equipment costing $180,000. No change in selling or administrative cost from their present levels is expected.
Required:
1. What type of relevant cost analysis would be appropriate in this situation (special order, make-lease-buy, etc.)? Why?
2. What role does depreciation and equipment purchase cost play in this decision?
3. What is the minimum amount that revenue would have to increase per month to justify the proposed production schedule? Ignore taxes and the time value of money

Accepted Answer

The answer of Apex Manufacturing Corporation is considering a significant...

Quiz 11: Decision Making With a Strategic Emphasis