Howie's accountant reviewed these calculations and thinks Howie made a mistake. For accounting purposes, factory overhead is assigned to products at a rate of $16 per labor hour. Howie's accountant argues that because Aqua-Spas require nine
labor hours, the pro?t margin on this product should be $144 less. Similarly, because Hydro-Luxes require six labor hours, the pro?t margin on this product should be $96 less. Who is right and why?
2. A variable that assumes an optimal value between its lower- and upper bounds has a reduced cost value of zero. Why must this be true? (Hint: What if such a variable's reduced cost value is not zero? What does this imply about the value of the objective
function?)