Maddox is a firm that is in the business of building and selling homes. The firm

Question

Maddox is a firm that is in the business of building and selling

homes. The firm offers 2 kinds of homes, Type A and Type B. Type A homes need four

thousand labor hours, two tons of stone, and two thousand board feet of lumber. B houses

require ten thousand labor hours, three tons of stone, and two thousand board feet of

lumber. Due to long lead times for ordering supplies and the scarcity of skilled and semiskilled workers in the area, the firm will be forced to rely on its present resources for

the upcoming building season. It has four hundred thousand hours of labor, one hundred

and fifty tons of stone, and two hundred thousand board feet of lumber. What mix of

Type A and B houses should the firm construct if A

Explanation / Answer

Profit of A per unit of labor hours = 1,000/4000= $0.4

Profit of A per ton of stone = 1000/2= $500

Profit of A per thousand board feet of lumber = 1000/2= $500

Profit of B per unit of labor hours = 2,000/10000= $0.2

Profit of B per ton of stone = 2000/3= $666.67

Profit of B per thousand board feet of lumber = 2000/2= $1000

B housed yield greater profit per unit of tone and lumber but Labor is the limited factor

Number of B housed built with four hundred thousand hours of labor= 400/10 = 40 B houses

Profit with40 B houses = 40*2000 = $80000

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