Note: This Problem Requires the Use of a Linear Programming $$y _ { i } = \left\{ \begin{array} { l } 1 , \text { if product } j \text { is produced } \\0 , \text { otherwise }\end{array} \right.$$

question 9

Multiple Choice

Note: This problem requires the use of a linear programming application such as Solver or Analytic Solver.
A manufacturer has the capability to produce both chairs and tables. Both products use the same materials (wood, nails and paint) and both have a setup cost ($100 for chairs, $200 for tables) . The firm earns a profit of $20 per chair and $65 per table and can sell as many of each as it can produce. The daily supply of wood, nails and paint is limited. To manage the decision-making process, an analyst has formulated the following linear programming model:
Max 20x1 + 65x2 - 100y1 - 200y2
s.t. 5x1 + 10x2 ? 100 {Constraint 1}
20x1 + 50x2 ? 250 {Constraint 2}
1x1 + 1.5x2 ? 10 {Constraint 3}
My1 ? x1 {Constraint 4}
My2 ? x2 {Constraint 5} $$y _ { i } = \left\{ \begin{array} { l } 1 , \text { if product } j \text { is produced } \\0 , \text { otherwise }\end{array} \right.$$
Set up the problem in Excel and find the optimal solution. What is the maximum profit possible?

• A) $25
• B) $50
• C) $75
• D) $100
• E) $125

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Definitions:

Significant Influence

The capacity of an investor to participate in the financial and operating policy decisions of an investee but not control those policies.

Equity Method

An accounting technique used by firms to assess the profits earned from their investments in other companies by reporting these profits as income.

Fair Value Method

An accounting approach that assesses assets and liabilities at their current market value rather than historical cost.

Equity Method

An accounting technique used by firms to assess the profits earned through their investments in other companies, recognizing income in proportion to ownership.