The Firm of Miller, Lombardi, and York Was Recently Formed

Essay

The firm of Miller, Lombardi, and York was recently formed by the merger of two companies providing accounting services.York's business was providing personal financial planning, while Miller and Lombardi conducted audits of small governmental units and provided tax-planning and preparation for several commercial firms.The combined firm has leased new offices and acquired several microcomputers that are used by the professional staff in each area of service.However, in the short run the firm does not have the financial resources to acquire computers for all of its professional staff.
The expertise of the professional staff can be divided into three distinct areas that match the services provided by the firm, i.e., tax preparation and tax planning, insurance and investments, and auditing.However, since the merger, the new firm has had to turn away business in all three areas of service.One of the problems is that while the total number of staff seems adequate, the staff members are not completely interchangeable.Limited financial resources do not permit hiring any new staff in the near future, and therefore, the supply of staff is restricted in each area.
Rick Oliva has been assigned the responsibility of allocating staff and computers to the various engagements.The management has given Oliva the objective of maximizing revenues in a manner consistent with maintaining a high level of professional service in each of the areas of service.Management's time is billed at $200 per hour and staff's time is billed at $140 per hour for those with experience, and $100 per hour for inexperienced staff.Pam Wren, a member of the staff, recently completed a course in managerial accounting at the local university.She suggested to Oliva, based on material covered in the course she took, that he use linear programming to assign the appropriate staff and computers to the various engagements.
Required:
1.Identify and discuss the assumptions underlying the linear programming model.
2.Explain the reasons why linear programming would be appropriate for Miller, Lombardi, and York to use in making staff assignments.
3.Identify and discuss the data that would be needed to develop a linear programming model for Miller, Lombardi, and York.
4.Discuss objectives other than revenue maximization that Rick Oliva should consider before making staff allocations.