Problem 2 [20%] Svenson Corporation manufactures two types of fishing rods, Basic and Deluxe. The Basic type requires 60 hours of labor and 24 machine-hours per unit. Deluxe type requires 102 labor-hours and 60 machine-hours per unit. Basic type has a unit contribution margin of $384, and Deluxe type has a unit contribution margin of $2,160.
The demand for Basic type exceeds Svenson's production capacity, which is limited by available machine-hours and direct manufacturing labor-hours. The maximum demand for Deluxe type is 240 per month. Direct manufacturing labor is limited to 4,800 hours per week and machine-hours are limited to 3,600 per week. Management desires a product mix that will maximize the weekly contribution toward fixed costs and profits. The management uses a linear programming approach, where B represents Basic type and D represents Deluxe type.
Required: Formulate the objective function (5%) and constraints (15%) necessary to determine the optimal product mix.
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