Question: Maximize , Z = 2 P - 5 C - 3 D , where P = total ( discounted ) profit over life of new
Maximize
where total discounted profit over life of new products,
change in either direction in current level of employment,
decrease if any in next year's earnings from current year's level.
The amount of any increase in earnings does not enter into because management is concemed primarily with just achieving some increase to keep the stockholders happy. It has mixed feelings about a large increase that then would be difficult to surpass in subsequent years.
The impact of each of the new products per unit rate of production on each of these factors is shown in the following table:
tableFactorUnit Contribution,Goal,UnitsProductLongrun profit,Maximize,tablemillions of dollarshundreds of employees
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