Question

3. Candy Kane Cosmetics (CKC) produces Leslie Perfume, which requires chemicals and labor. Two production processes are available: Process 1 transforms 1 unit of labor and 2 units of chemicals into 3 oz of perfume. Process 2 transforms 2 units of labor and 3 units of chemicals into 5 oz of perfume. It costs CKC $3 to purchase a unit of labor and $2 to purchase a unit of chemicals. Each year, up to 20,000 units of labor and 35,000 units of chemicals can be purchased. Each ounce of Leslie Perfume sells for $5.

Answer 1

using solver, the optimal solution is 6,666P₁ or process 1 should work for 6,666 hours during the year.

Total production = 6,666 x 3 = 19,998 ounces of perfume.

Total revenue = 19,998 x $5 = $99,990

Total costs = (6,666 x $3 per labor hour) + (6,666 x 2 x $2 per unit of chemicals) = $46,662

Operating income = $53,328

Explanation:

Variables:

P₁ = number of hours in process 1

P₂ = number of hours in process 2

P₁ yields 3 ounces of perfume

P₂ yields 5 ounces of perfume

both are sold at $5 per ounce

15P₁ + 25P₂

labor usage:

(1P₁ + 2P₂) x $3

3P₁ + 6P₂

chemicals usage:

(2P₁ + 3P₂) x $2

4P₁ + 6P₂

Profit = 15P₁ + 25P₂ - (3P₁ + 6P₂) - (4P₁ + 6P₂) = 8P₁ + 13P₂

so we need to maximize 8P₁ + 13P₂

the constraints are:

3P₁ + 6P₂ ≤ 20,000

4P₁ + 6P₂ ≤ 35,000

P₁, P₂ ≥ 0

using solver, the optimal solution is 6,666P₁ or process 1 should work for 6,666 hours during the year.

Total production = 6,666 x 3 = 19,998 ounces of perfume.

Total revenue = 19,998 x $5 = $99,990

Total costs = (6,666 x $3 per labor hour) + (6,666 x 2 x $2 per unit of chemicals) = $46,662

Operating income = $53,328