The linear programming model is an important tool for making product mix decisions.
Although the linear programming model produces an optimal product mix decision,
its real managerial value—particularly in today’s business environment—may be
more related to the kinds of inputs that must be generated for the model to be used.
Unit-level prices and unit-level variable costs must be assessed. Furthermore, applying
the model forces management to identify internal and external constraints. Internal constraints
relate to how products consume resources; thus, resource usage relationships
must be identified. Once the constrained relationships are known to management, they
can be used by management to identify ways of improving a firm’s performance in a
variety of ways, including inventory management