The Jefferson Adding Machine Company will begin production of two new models of electronic calculators during the next three months. Since these models require an expansion of the current production operation, the company will need operating funds to cover material, labor, and other expenses during the initial production period. Revenue from this initial production period will not be available until after the end of the period. Thus, the company must arrange financing for these operating expenses before production can begin.

Jefferson has set aside $3,000 in internal funds to cover expenses of this operation. If additional funds are needed, they will have to be generated externally. A local bank has offered a line of short-term credit in an amount no to exceed $10,000. The interest rate over the life of the loan will be 12% per year on the average amount borrowed. One stipulation set by the bank requires that the remainder of the company cash set aside for this operation plus the accounts receivable for this product line be at least twice as great as the outstanding loan plus interest at the end of the initial production period.

In addition to the financial restrictions placed on this operation, labor capacity is also a factor for Jefferson to consider. Only 2500 hours of assembly time and 150 hours of packaging and shipping time are available for the new product line during the initial 3-month production period. Relevant cost, price, and production time requirements for the two models, referred to as Y and Z, are shown below:

                                                                                   LABOR HOURS REQUIRED

          SELLING                                      PROFIT                  PACKAGING &

MODEL      UNIT COST      PRICE        MARGIN       ASSEMBLY     SHIPPING

    Y                  $50                 $58              $8.00                 12                     1

    Z                $100               $120              $20.0                25                     2

Objective maximize: 8x1 + 6.50x2 + 20x3 +17x4..

but I don't know where 6.50 and 17 from. Can anyone explain it to me?

Answer rating: 100% (QA)

The objective of this problem is to maximize the profits of the Jefferson Adding Machine Company The objective is expressed as 8x1 650x2 20x3 17x4 where x1 x2 x3 and x4 represent the number of Model Y ... View the full answer