Computer Products Produces Two Keyboards, Regular and Special

question 63

Multiple Choice

Computer Products produces two keyboards, Regular and Special. Regular keyboards have a unit contribution margin of $128, and Special keyboards have a unit contribution margin of $720. The demand for Regulars exceeds Computer Product's production capacity, which is limited by available machine-hours and direct manufacturing labor-hours. The maximum demand for Special keyboards is 80 per month. Management desires a product mix that will maximize the contribution toward fixed costs and profits. Direct manufacturing labor is limited to 1,600 hours a month and machine-hours are limited to 1,200 a month. The Regular keyboards require 20 hours of labor and 8 machine-hours. Special keyboards require 34 labor-hours and 20 machine-hours.
Let R represent Regular keyboards and S represent Special keyboards. The correct set of equations for the keyboard production process is:

• A) Maximize: $128R + $720S
• Constraints:
• Labor-hours: 20R + 34S ≤ 1,600
• Machine-hours: 8R + 20S ≤ 1,200
• Special: S ≤ 80
• S ≥ 0
• Regular: R ≥ 0
• B) Maximize: $128R + $720S
• Constraints:
• Labor-hours: 20R + 34S ≥ 1,600
• Machine-hours: 8R + 20S ≥≤ 1,200
• Special: S ≥ 80
• S ≥ 0
• Regular: R ≥ 0
• C) Maximize: $720S + $128R
• Constraints:
• Labor-hours: 20R + 8S ≤ 1,600
• Machine-hours: 34R + 20S ≤ 1,200
• Special: S ≤ 80
• S ≥ 0
• Regular: R ≥ 0
• D) Maximize: $128R + $720S
• Constraints:
• Labor-hours: 20R + 34S ≤ 1,600
• Machine-hours: 8R + 20S ≤ 1,200
• Special: S ≥ 80
• S ≤ 0
• Regular: R ≤ 0

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Definitions:

Underwriting

involves the process of evaluating and assuming risk in financial transactions, notably in insurance and investments.

Insurance Company

A financial institution that provides coverage against specified risks in exchange for premiums, offering policies for health, life, property, and other forms of insurance.

Home Mortgage Loans

Loans provided by financial institutions to individuals for the purpose of purchasing residential properties, secured by the property itself.

Savings Banks

Financial institutions primarily engaged in accepting savings deposits and making loans and other investments.