Determine the optimal amount of service provided by bf

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Reference no: EM13160501

Bright Future, Ltd (BF) is a nonprofit foundation providing medical treatment to emotionally distressed children. BF has hired you as a business consultant to design an employment policy that would be consistent with its goal of providing the maximum possible service given its limited financial resources. You have determined that the service (Z) provided by BF is a function of its medical staff input (M) and sound service input (S) which is given by:

Z = M + .5S + .5 MS - S2

BFs staff budget for the coming year is $1,200,000. Annual employment costs are $30,000 for each social service staff member (S) and $60,000 for each medical staff member (M).

(a) Using the Lagrangean multiplier approach calculate the optimal (i.e., service maximizing) combination of medical and social staff. Determine the optimal amount of service provided by BF.

(b) Calculate BF%u2019s marginal cost. Explain your answer.

(c) Using Excel-Solver verify your answer to (a).

(Show your work. Show the spreadsheets in detail. Provide print outs with Solver window. To print the solver window, use print screen
command on your key board and then create a MS Word document using paste.)

Reference no: EM13160501

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