A Company Makes Products a and B from 2 Resources

question 62

Multiple Choice

A company makes products A and B from 2 resources, labor and material. The company wants to determine the selling price which will maximize profits. A unit of product A costs 25 to make and demand is estimated to be 20 − .10 * Price of A. A unit of product B costs 18 to make and demand is estimated to be 30 − .07 * Price of B. The utilization of labor and materials and the available quantity of resources is shown in the table. A reasonable price for the products is between 100 and 200. Let X₁ = demand for As and X₂ = demand for Bs. Let P₁ = price for As and P₂ = price for Bs.
The objective function for this problem is?

• A) MAX 25 X₁ + 18 X₂
• B) MAX (20 − 0.10*P₁) X₁ + (30 − 0.07*P₂) X₂
• C) MAX 20 P₁ − 0.1 P₁² + 30 P₂ − 0.07 P₂² − 1040
• D) MAX 22.5 P₁ − 0.1 P₁² + 31.26 P₂ − 0.07 P₂² − 1040

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Definitions:

Sale of Goods

A transaction between a buyer and seller where the ownership of tangible personal property is transferred for a price.

Quantity Term

A provision in a contract that specifies the amount of goods or services to be provided or delivered.

Enforceable

A term used to describe a legal agreement or rule that can be upheld or compelled by law.

Oral Contract

An agreement made through spoken communication between parties, rather than in writing, yet is legally binding.