The manger of an electric company is engaged in the production of two components C1 and C2 used in the radio sets. Each unit of C1 costs the company birr 5 in wages and birr 5 in material, while each of C2 costs the company birr 25 in wages and birr 15 in material. The company sells both products on one period credit terms, but the company’s labors and material expenses must be paid in cash. The selling price of C1 is birr 30 per unit and C2 is birr 70 per unit. Because of the strong monopoly of the company for these components, it is assumed that the company can sell at the prevailing prices as many units as it produces. The company’s production capacity is, however limited by two considerations. First at the beginning of period one the company has an initial balance of birr 4,000(cash +bank credit+ collection from past credit sales). Second, the company has available in each period 2,000 hours of machine time and 1,400 hours of assembly time. The production of each C1 requires 3 hours of machine and 2 hours of assembly time, where as the production of each C2 requires 2 hours of machine time and 3 hours for assembly time. Formulate this problem as Lp model so as to maximize the total profit to the company.
