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Sweet Stuff is a small candy manufacturing company that produces two types of chocolate, x and y.

INSTRUCTIONS TO CANDIDATES
ANSWER ALL QUESTIONS

Question 1

A. Sweet Stuff is a small candy manufacturing company that produces two types of chocolate, x and y. Both require milk and cacao only, as follows:

 

i. A unit of x requires 1 unit of milk and 3 units of cacao

ii. A unit of y requires 1 unit of milk and 2 units of cacao

The company kitchen has a total of 5 units of milk and 12 units of cacao. On each sale, the company makes a profit of:

 

i. $6 per unit of x sold

ii. $5 per unit of y sold

 

Sweet Stuff wishes to maximise profit. Use a linear programming method to determine how many units of x and y should be produced as well as the maximum profit to be earned at that level of production. (10 marks)

 

B. Hammonds Corporation is trying to decide between two order plans for its inventory of a certain item. Irrespective of the plan, demand for the item is expected to be 1 000 units annually. Under plan A, order costs would be $40 per order and inventory holding costs (carrying cost) would be $100 per unit per annum. Under plan B, order costs would be $30 per order while holding costs would be 20% of the unit cost which is $480. Determine:

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