A Company Is Developing a Linear Programming Model for Its

question 56

Multiple Choice

A company is developing a linear programming model for its aggregate production plan. If I_t = units in inventory at the end of period t, P_t = units produced in period t, and D_t = demand in period t, then the company's demand constraint to ensure that demand is met in quarter 3 is

• A) D₃ = I₂ - I₃ + P₃.
• B) D₃ = I₃ + P₃.
• C) D₃ = I₃ - I₂ + P₃.
• D) D₃ = I₂ - I₃ + P₂.

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Definitions:

Relevant Cost

Costs that differ between alternatives in a decision-making process, and therefore, should be considered when evaluating those alternatives.

Avoidable Costs

Expenses that can be eliminated if a particular decision is made, such as discontinuing a product or service.

Sunk Costs

Costs that have already been incurred and cannot be recovered or changed.

Business Segment

A division within a company that generates its own revenue and expenses, often focusing on a specific product or market.