AD distributes 15 frozen vegetable products and must decide how much of each product to purchase each week to maximize profits. The company has a $30,000 budget to purchase products in quantities between the minimum required by contracts and maximum estimated sales. The optimal product quantities must be determined to maximize profits within these constraints.
Coco Scents produces perfume, cologne, and body spray using limited supplies of the expensive ingredient ambergris. It must determine the optimal product mix and quantities to produce to maximize after-tax net income, given minimum sales requirements and costs of ingredients and production for each product.
AD distributes 15 frozen vegetable products and must decide how much of each product to purchase each week to maximize profits. The company has a $30,000 budget to purchase products in quantities between the minimum required by contracts and maximum estimated sales. The optimal product quantities must be determined to maximize profits within these constraints.
Coco Scents produces perfume, cologne, and body spray using limited supplies of the expensive ingredient ambergris. It must determine the optimal product mix and quantities to produce to maximize after-tax net income, given minimum sales requirements and costs of ingredients and production for each product.
AD distributes 15 frozen vegetable products and must decide how much of each product to purchase each week to maximize profits. The company has a $30,000 budget to purchase products in quantities between the minimum required by contracts and maximum estimated sales. The optimal product quantities must be determined to maximize profits within these constraints.
Coco Scents produces perfume, cologne, and body spray using limited supplies of the expensive ingredient ambergris. It must determine the optimal product mix and quantities to produce to maximize after-tax net income, given minimum sales requirements and costs of ingredients and production for each product.
AD distributes 15 frozen vegetable products and must decide how much of each product to purchase each week to maximize profits. The company has a $30,000 budget to purchase products in quantities between the minimum required by contracts and maximum estimated sales. The optimal product quantities must be determined to maximize profits within these constraints.
Coco Scents produces perfume, cologne, and body spray using limited supplies of the expensive ingredient ambergris. It must determine the optimal product mix and quantities to produce to maximize after-tax net income, given minimum sales requirements and costs of ingredients and production for each product.
1. Auchan Distributors The product portfolio problem asks which products a firm should be making. If there are contracts that obligate the firm to enter certain markets, then the question is which products to make in quantities beyond the required minimum. Consider Auchan Distributors (AD), a company that distributes 15 different vegetables to grocery stores. AD’s vegetables come in standard cardboard cartons that each take up 1.25 cubic feet in the warehouse. The company replenishes its supply of frozen foods at the start of each week and rarely has any inventory remaining at week’s end. An entire week’s supply of frozen vegetables arrives each Monday morning at the warehouse, which can hold up to 18000 cubic feet of product. In addition, AD’s supplier extends a line of credit amounting to $30,000. That is, AD is permitted to purchase up to $30,000 worth of product each Monday. AD can predict sales for each of the 15 products for the coming week. The forecast is expresses in terms of a minimum and a maximum level of sales. The minimum quantity is based on a contractual agreement that AD has made with a few retail grocery chains; the maximum quantity represents an estimate of the sales potential in the upcoming week. The unit cost and unit selling price for each product are known. The given data are compiled in the following table.
What quantities of each product should AD buy to maximize profit?
2. Coco Scents Inc. A common problem in manufacturing businesses is deciding on a product mix for different items in the same product family. Coco Scents Inc. makes a premium collection of perfume, cologne, and body spray for sale in large department stores and boutiques. The primary ingredient is ambergris, a valuable digestive secretion from whales that is harvested without harming the animals. Ambergris costs more than $9,000 per pound and is very difficult to obtain in large quantities; Coco Scents can only obtain about 20 pounds of ambergris each year. The other ingredients— deionized water, ethanol, and various additives—are available in unlimited quantities for a reasonable cost. Create a spreadsheet model for Solver to determine the optimal product mix that maximizes Coco Scents’ net income after taxes. You are given the following information: Body Spray Cologne Perfume Sales price/bottle $11.95 $21.00 $53.00 Conversion Cost per $2.60 $6.50 $13.00 Unit (Direct Labor plus Manufacturing Overhead)
Minimum Units 60000 25000 12000
Required (minimum amount to be supplied to customers) Income Tax Rate 32% Sales, General and $0.30 Administrative Expenses per Dollar Revenue
Cost per lb, Deionized $0.50
Water
Cost per lb, Ethanol $1.00
Cost per lb, Other $182.00
Additives Cost per lb, Ambergis $9072.00
The bill of materials is the list of raw materials and ingredients required to make one unit of a product. Bill of Materials Body Spray Cologne Perfume Deionized Water 0.1 0.1 0.05 (lb/unit) Ethanol (lb/unit) 0.1 0.02 0.01 Other Additives 0.01 0.001 0.0001 (lb/unit) Ambergis (lb/unit) 0.0001 0.00018 0.00055
