Duo Company manufactures two products, Uno and Dos. Contribution margin data
Uno DosUnit sales$13.00 $31.00 Less variable cost: Direct material$7.00 $5.00 Direct labor 1.00 6.00 Variable overhead 1.25 7.50 Variable selling and administrative cost 0.75 0.50 Total variable cost$10.00 $19.00 Unit contribution margin$3.00 $12.00
Assume that the direct-labor rate is $24 per hour, and 10,000 labor hours are available per year. In addition, the company has a short supply of machine time. Only 8,000 hours are available each year. Uno requires 1 machine hour per unit, and Dos requires 2 machine hours per unit.
Formulate the production planning problem as a linear program, assuming X, Y ≥ 0. X denotes Uno and Y denotes Dos.
- Identify the objective function.
- Identify the constraints.