Objective 11.8
1) Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is ________.
A) focused on short-term performance
B) based solely on quantitative factors
C) consistent with the decision model
D) based solely on qualitative factors
2) Performance evaluation focuses on responsibility centers for a specific period, not on projects or individual items of equipment over their useful lives.
3) How can conflicts arise between the decision model and the performance evaluation model used to evaluate managers? Provide an example of this type of conflict.
Objective 11.A
1) Linear programming is a tool that maximizes total contribution margin of a mix of products with multiple constraints.
2) Which of the following is an assumption of linear programming?
A) Average variable costs remain constant throughout the year.
B) Opportunity costs are irrelevant in decision making.
C) Few sunk costs are relevant in decision making.
D) All costs are either variable or fixed for a single cost driver.
3) In linear programming, the goals of management are expressed in ________.
A) an objective function
B) constraints
C) operating policies
D) business functions
4) A mathematical inequality or equality that must be appeased is known as a(n) ________.
A) objective function
B) constraint
C) operating policy
D) business function
5) Computer Products produces two keyboards, Regular and Special. Regular keyboards have a unit contribution margin of $128, and Special keyboards have a unit contribution margin of $720. The demand for Regulars exceeds Computer Product's production capacity, which is limited by available machine-hours and direct manufacturing labor-hours. The maximum demand for Special keyboards is 80 per month. Management desires a product mix that will maximize the contribution toward fixed costs and profits.
Direct manufacturing labor is limited to 1,600 hours a month and machine-hours are limited to 1,200 a month. The Regular keyboards require 20 hours of labor and 8 machine-hours. Special keyboards require 34 labor-hours and 20 machine-hours.
Let R represent Regular keyboards and S represent Special keyboards. The correct set of equations for the keyboard production process is ________.
A) Maximize:$128R + $720S
Constraints:
Labor-hours:20R + 34S ≤ 1,600
Machine-hours:8R + 20S ≤ 1,200
Special:S ≤ 80
S ≥ 0
Regular:R ≥ 0
B) Maximize:$128R + $720S
Constraints:
Labor-hours:20R + 34S ≥ 1,600
Machine-hours:8R + 20S ≥≤ 1,200
Special:S ≥ 80
S ≥ 0
Regular:R ≥ 0
C) Maximize:$720S + $128R
Constraints:
Labor-hours:20R + 8S ≤ 1,600
Machine-hours:34R + 20S ≤ 1,200
Special:S ≤ 80
S ≥ 0
Regular:R ≥ 0
D) Maximize:$128R + $720S
Constraints:
Labor-hours:20R + 34S ≤ 1,600
Machine-hours:8R + 20S ≤ 1,200
Special:S ≥ 80
S ≤ 0
Regular:R ≤ 0
6) In linear programming, a constraint is a mathematical inequality or equality that must be satisfied by the variables in a mathematical model.
7) Local Steel Construction Company produces two products, steel and wood beams. Steel beams have a unit contribution margin of $200, and wood beams have a unit contribution margin of $150. The demand for steel beams exceeds Local Steel Construction Company's production capacity, which is limited by available direct labor and machine-hours. The maximum demand for wood beams is 90 per week. Management desires that the product mix should maximize the weekly contribution toward fixed costs and profits.
Direct manufacturing labor is limited to 3,000 hours a week and 1,000 hours is all that the company's outdated machines can run a week. The steel beams require 120 hours of labor and 60 machine-hours. Wood beams require 150 labor hours and 120 machine-hours.
Required:
Formulate the objective function and constraints necessary to determine the optimal product mix.
