Describe the three steps in solving a linear programming problem.
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Susan Smith manages the Wexford plant of Sanchez Manufacturing. A representative of Darnell Engineering approaches Smith about replacing a large piece of manufacturing equipment that Sanchez uses in its process with a more efficient model. While the representative made some compelling arguments in favor of replacing the 3 -year-old equipment, Smith is hesitant. Smith is hoping to be promoted next year to manager of the larger Detroit plant, and she knows that the accrual-basis net operating income of the Wexford plant will be evaluated closely as part of the promotion decision. The following information is available concerning the equipment replacement decision: Sanchez uses straight-line depreciation on all equipment. Annual depreciation expense for the old machine is \(\$ 180,000\) and will be \(\$ 270,000\) on the new machine if it is acquired. For simplicity, ignore income taxes and the time value of money. 1\. Assume that Smith's priority is to receive the promotion and she makes the equipment-replacement decision based on the next one year's accrual-based net operating income. Which alternative would she choose? Show your calculations. 2\. What are the relevant factors in the decision? Which alternative is in the best interest of the company over the next 2 years? Show your calculations. 3\. At what cost would Smith be willing to purchase the new equipment? Explain.
Define relevant costs. Why are historical costs irrelevant?
Wechsler Company produces three products: \(A 130, B 324,\) and C587. All three products use the same direct material, Brac. Unit data for the three products are: The demand for the products far exceeds the direct materials available to produce the products. Brac costs S9 per pound, and a maximum of 5,000 pounds is available each month. Wechsler must produce a minimum of 200 units of each product. 1\. How many units of product \(A 130, B 324\), and \(C 587\) should Wechsler produce? 2\. What is the maximum amount Wechsler would be willing to pay for another 1,200 pounds of Brac?
How might the optimal solution of a linear programming problem be determined?
Lees Corp. is deciding whether to keep or drop a small segment of its business. Key information regarding the segment includes: Contribution margin: 35,000 Avoidable fixed costs: 30,000 Unavoidable fixed costs: 25,000 Given the information above, Lees should: a. Drop the segment because the contribution margin is less than total fixed costs. b. Drop the segment because avoidable fixed costs exceed unavoidable fixed costs. c. Keep the segment because the contribution margin exceeds avoidable fixed costs. d. Keep the segment because the contribution margin exceeds unavoidable fixed costs.
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