Aunt Anastasia Operates a Small Business: She Produces Seasonal Ceramic

question 30

Multiple Choice

Aunt Anastasia operates a small business: she produces seasonal ceramic objects to sell to tourists. For the spring, she is planning to make baskets, eggs, and rabbits. Based on your discussion with your aunt you construct the following table:
$$\begin{array} { l c c c c } \text { Product } & \begin{array} { c } \text { Mix/mold } \\\text { requirements (lb) }\end{array} & \begin{array} { c } \text { Kiln } \\\text { (units) }\end{array} & \begin{array} { c } \text { Paint \& Seal } \\\text { (hr) }\end{array} & \begin{array} { c } \text { Profit/product } \\\text { (\$) }\end{array} \\\hline \text { Baskets } & 0.500 & 1 & 0.250 & \$ 2.50 \\\text { Eggs } & 0.333 & 1 & 0.333 & \$ 1.50 \\\text { Rabbits } & 0.250 & 1 & 0.750 & \$ 2.00 \\\text { Capacity } & 20 \text { pounds } & 50 \text { units } & 80 \text { hours } & \\\hline\end{array}$$ Your aunt also has committed to make 25 rabbits for a charitable organization. Based on the information in the table, you formulate the problem as a linear program.
B = number of baskets produced
E = number of eggs produced
R = number of rabbits produced
MAX 2.5B + 1.5E + 2R
s.t.
   0.5B + 0.333E + 0.25R ? 20
   B + E + R ? 50
   0.25B + 0.333E + 0.75R ? 80
   R ? 25
The Excel solution and the answer and sensitivity report are shown below.
The Answer Report:
$\begin{array}{l}\text { Target Cell (Max) }\\\begin{array}{cccc}\hline \text { Cell } & \text { Name } & \begin{array}{c}\text { Original } \\\text { Value }\end{array} & \text { Final Value } \\\hline \$ C \$ 21 & \text { Profit } & 0 & \$ 112.5\end{array}\end{array}$

$\text { Adjustable Cells }$
$\begin{array}{cccc}\text { Cell } & \text { Name } & \begin{array}{c}\text { Original } \\\text { Value }\end{array} & \text { Final Value } \\\hline \$ C \$ 18 & \text { Baskets } & 0 & 25 \\\hline\$ C \$ 19 & \text { Eggs } & 0 & 0 \\\hline\$ C \$ 20 & \text { Rabbits } & 0 & 25\\\hline\end{array}$

$\text { Constraints }$
$\begin{array}{cccccc}\hline\text { Cell } & \text { Name } & \text { Cell Value } & \text { Formula } & \text { Status } & \text { Slack } \\\hline & & & & \text { Not } & \\\text { \$G\$13 } & \text { Mix/mold } & 18.75 & \text { \$G\$13<=\$F\$13 } & \text { Binding } & 1.25 \\\hline\text { \$G\$14 } & \text { Kiln } & 50 & \text { \$G\$14<=\$F\$14 } & \text { Binding } & 0 \\\hline & & & & & \text { Not } \\\text { \$G\$15 } & \text { Paint and Seal } & 25 & \text { \$G\$15<=\$F\$15 } & \text { Binding } & 55 \\\hline \text { \$G\$16 } & \text { Demand } & 25 & \text { \$G\$16>=\$F\$16 } & \text { Binding } & 0\end{array}$ The Sensitivity Report:
$\text { Adjustable Cells }$
$\begin{array}{ccccccc}\hline\text { Cell } & \text { Name } & \begin{array}{c}\text { Final } \\\text { Value }\end{array} & \begin{array}{c}\text { Reduced } \\\text { Cost }\end{array} & \begin{array}{c}\text { Objective } \\\text { Coefficient }\end{array} & \begin{array}{c}\text { Allowable } \\\text { Increase }\end{array} & \begin{array}{c}\text { Allowable } \\\text { Decrease }\end{array} \\\hline \$ C \$ 18 & \text { Baskets } & 25 & 0 & 2.5 & 1 \mathrm{E}+30 & 0.5 \\\hline \text { \$C\$19 } & \text { Eggs } & 0 & -1 & 1.5 & 1 & 1 \mathrm{E}+30 \\\hline \text { \$C\$20 } & \text { Rabbits } & 25 & 0 & 2 & 0.5 & 1 \mathrm{E}+30\end{array}$


$\text { Constraints }$
$\begin{array}{ccccccc}\hline\text { Cell } & \text { Name } & \begin{array}{c}\text { Final } \\\text { Value }\end{array} & \begin{array}{c}\text { Shadow } \\\text { Price }\end{array} & \begin{array}{c}\text { Constraint } \\\text { R.H. Side }\end{array} & \begin{array}{c}\text { Allowable } \\\text { Increase }\end{array} & \begin{array}{c}\text { Allowable } \\\text { Decrease }\end{array} \\\hline \$ G \$ 13 & \text { Mix/mold } & 18.75 & 0 & 20 & 1 \mathrm{E}+30 & 1.25 \\\hline \$ G \$ 14 & \text { Kiln } & 50 & 2.5 & 50 & 2.5 & 25 \\\hline \$ G \$ 15 & \text { Paint and Seal } & 25 & 0 & 80 & 1 \mathrm{E}+30 & 55 \\\hline \text { \$G } \$16 & \text { Demand } & 25 & -0.5 & 25 & 25 & 5 \\\hline\end{array}$
-Which additional resources would you recommend that Aunt Anastasia try to obtain?

• A) mix/mold
• B) kiln
• C) paint and seal
• D) demand

Identify the differences between various types of leases (operating, capital/sales-type, direct-financing) and determine the correct classification.

Calculate the present value of lease payments using provided discount rates.

Understand how maintenance agreements and executory costs are treated in lease accounting.

Recognize the impact of leasing on financial ratios.

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Definitions:

Long Term Assets

Assets that are expected to provide economic benefits to a company over a period longer than one year, like buildings and machinery.

Condensed Balance Sheets

Simplified financial statements presenting only the most essential information about a company's financial position.

Fixed Assets

Long-term tangible assets used in the operation of a business that are not likely to be converted to cash within one year.

Capital Expenditures

Financial resources dedicated by a corporation towards the acquisition, betterment, and maintenance of real assets, like real estate, industrial plants, or machinery.