Part 1

1.Describe the steps in solving a linear programming problem.

2."Management should always maximize sales of the product with highest contribution margin unit." Do you agree? Why?

Part 2

1. A firm manufactures two products, A and B. There is only one machine with 3000 hours available per year. Each unit of product A requires 4 machine hours while each unit of Product B requires 3 machine hours. A summary of the profitability of each product is provided below.

Product A Product B Selling price $150 $120 Costs: Direct material $60 $15 Direct labour $15 $25 Variable overhead $15 $20Department Minutes Mixing Filling Baking Della's Delight 30 0 10 Bonny's Bourbon 15 15 15 Total available per day 660 270 300Della's Delight Bonny's Bourbon Revenue per batch $475 $375 Variable cost per batch 175 125 Contribution margin per batch $300 $250 Monthly fixed costs (allocated to each product) $18,650 $22,350