A Facility Produces Two Products

question 56

Multiple Choice

A facility produces two products. The labor constraint (in hours) is formulated as: 350x₁+300x₂ ≤ 10,000. The number 350 means that

• A) one unit of product 1 contributes $350 to the objective function.
• B) one unit of product 1 uses 350 hours of labor.
• C) the problem is unbounded.
• D) the problem has no objective function.

---

Definitions:

Operating Leverage

An indicator of how increases in revenue lead to expansions in operating income, showing the level of fixed expenses within a company's cost framework.

Fixed Costs

Costs that do not change with the level of goods or services produced by a business.

Variable Costs

Expenses that change in proportion to the activity of a business, such as the cost of raw materials or production costs.

Variable Costs

Costs that vary directly with the level of production or output.