Comments

  1. avatar says

    Dear John,
    The example you’ve shown here is a 3rd example, which I encounter since I study F5, where the highest profit is earned at the intersection of labour hours and machine hours lines. Is this a rule? If yes, why don’t we go straight to that intersection?
    Why did you say that that the any of the corners could be most profitable?

    • Avatar of John Moffat says

      No it isn’t a rule. The highest contribution will be earned at whichever of the corners is the furthest away from the origin when moving out the iso-contribution line.

      If you watch the video again you will see that if the line were a different angle, then when it is moved out then a different corner could be the furthest away.

      If you are not sure what I mean, just suppose the question was exactly the same except that the contribution per unit for S was $10, and for E was $1. The constraints are all the same and so the graph is the same.
      However, point A would then give the highest contribution ($360). Point B would only give a contribution of $305.

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