11. MELBON CO
Melbon Co makes two products, Seebach (S) and the Herdorf (H).
To make a unit of each product the following resources are required:
Materials ($100 per kg) 5 kg 7 kg
Labour hours ($45 per hour) 2 hours 3 hours
Machine hours ($60 per hour) 3 hours 2 hours
Fixed overheads are $300,000 each month.
The contribution per unit made on each product is as follows:
Contribution ($ per unit) 250 315
The maximum demand each month is 4,000 units of S and 3,000 units of H. The products and materials are perishable and inventories of raw materials or finished goods cannot be stored.
Melbon Co has a legally binding obligation to produce a minimum of 2,000 units of H in each of months 1 and 2. There is no minimum production required in month 3.
The manufacturing manager is planning production volumes and the maximum availability of resources for months 1, 2 and 3 are as follows:
Month 1 2 3
Materials (kg) 34,000 42,000 35,000
Labour (hours) 18,000 12,000 24,000
Machine (hours) 18,000 19,000 12,000
For month 3 the following linear programming graph has been produced: