Phoenix Telephone Equipment Ltd. (PTE) produces a number of products ranging from consumer products to networking equipment.
Question:
Phoenix Telephone Equipment Ltd. (PTE) produces a number of products ranging from consumer products to networking equipment. PTE’s main consumer products are three models of cordless telephone: the A-model, the B-model, and the C-model. There are set-up costs for the A and B models, namely $4000 and $5000, but no set-up cost for the C model. Profit contribution per phone sold is $38 for the A model, $55 for the B model, and $42 for the C-model. The demand for the models is 400 A-model, 550 B-model, and 600 C-model, and PTE absolutely will not produce more than the demand for any product. In addition, material limitations mean that PTE can produce at most 1400 telephones.
All telephones will be produced on one production line, and PTE will have to decide which line to use. For each line there is a capacity limitation related to labor hours, expressed as follows (where A, B, and C are the number of A-models, B-models, and C-models produced, respectively):
Line | Labor hour constraint if Line is used |
Line 1 | 6A + 3B + 2C ≤ 3800 (hours) |
Line 2 | 4A + 2B + 5C ≤ 3700 (hours) |
On Line 2, it is possible for $20 per hour to increase the number of hours by up to 300 additional hours.
The objective is to maximize the net profit. Formulate algebraically the above BIP problem. Define the decision variables, objective function, and constraints.
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello