Wayland Company Manufacturers Two Models of Its Twin Size Futons

question 48

Multiple Choice

Wayland Company manufacturers two models of its twin size futons, standard and deluxe, in two locations, I and II. The maximum output at location I is 600/week, whereas the maximum output at location II is 400/week. The profit per futon for standard and deluxe models manufactured at Location I is $30 and $20 respectively; the profit per futon for standard and deluxe modelsmanufatured at Location II is $34 and $18, respectively. For a certain week, the company has recieved an order of 600 standard models and 300 deluxe models. If prior commitments dictate that the number of deluxe models manufactured at Location II not exceed the number of standard models manufactured there by more than 50. Find how many of each model should be manufactured at each location so as to satisfy the order and at the same time maximize the Wayland's profit. What is the maximum profit?

• A) 400 standard and 300 deluxe futons should be produced at location I and 400 standard and 0 deluxe futons should be produced at location II for a maximum profit of $25,600.
• B) 200 standard and 0 deluxe futons should be produced at location I and 400 standard and 300 deluxe futons should be produced at location II for a maximum profit of $25,600.
• C) 200 standard and 0 deluxe futons should be produced at location I and 40.0 standard and 300 deluxe futons should be produced at location II for a maximum profit of $25,600.
• D) 200 standard and 300 deluxe futons should be produced at location I and 400 standard and 0 deluxe futons should be produced at location II for a maximum profit of $25,600.
• E) 400 standard and 300 deluxe futons should be produced at location I and 200 standard and 0 deluxe futons should be produced at location II for a maximum profit of $25,600.

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Definitions:

Financial Leverage

The use of borrowed capital (debt) to increase the potential return of an investment.

Capital Structure

The blend of loans and shareholder capital utilized by a corporation to support its operational activities and development.

Debt

Borrowed money that is expected to be repaid in the future, typically with interest.

Cash Flow to Creditors

The sum of interest payments and net new borrowings, representing the cash flow from a company to its creditors during a period.