The labour requirement for a special contract is 250 skilled labour hours paid at $10 per hour and 750 semi-skilled labour hours paid at $8 per hour. At present, skilled labour is fully utilised on other contracts which generate a $12 contribution per hour, after charging labour costs. Additional skilled labour is unavailable in the short term. There is a surplus of 1,200 semi-skilled hours over the period of the contract but the firm has a policy of no redundancies. The relevant cost of labour for the special contract is:
A company accountant is trying to determine the optimum production plan for the period using linear programming. The accountant has correctly formulated the linear programming problem as follows: Variables (products): x and y Objective function: Maximise contribution, C = 10x + 15y Material constraint: 4x + 6y 500 (kg) Labour constraint: x + 2y 350 (hours) Machine constraint: 10x + 4y 1,500 (hours) x constraint: 50 x 200 y constraint: y 0 Which of the following statements is true?