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    Problem Set 5 - More Optimization Problems

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    Anshana wadhwani
    The document describes two optimization problems: 1. Parfum du Lys is launching an advertising campaign for three cleaning products. The objective is to determine the optimal allocation of advertising spending between television and print media to meet sales goals at minimum cost. 2. Coco Scents produces perfumes and must determine the optimal product mix to maximize profits given constraints on the scarce ingredient ambergris and minimum production requirements. An Excel solver model will be created to determine the optimal solution.

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    Problem Set 5 - More Optimization Problems

    Uploaded by

    Anshana wadhwani
    28 views3 pages
    The document describes two optimization problems: 1. Parfum du Lys is launching an advertising campaign for three cleaning products. The objective is to determine the optimal allocation of advertising spending between television and print media to meet sales goals at minimum cost. 2. Coco Scents produces perfumes and must determine the optimal product mix to maximize profits given constraints on the scarce ingredient ambergris and minimum production requirements. An Excel solver model will be created to determine the optimal solution.

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    Problem Set 5_More Optimization Problems

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    The document describes two optimization problems: 1. Parfum du Lys is launching an advertising campaign for three cleaning products. The objective is to determine the optimal allocation of advertising spending between television and print media to meet sales goals at minimum cost. 2. Coco Scents produces perfumes and must determine the optimal product mix to maximize profits given constraints on the scarce ingredient ambergris and minimum production requirements. An Excel solver model will be created to determine the optimal solution.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    28 views3 pages

    Problem Set 5 - More Optimization Problems

    Uploaded by

    Anshana wadhwani
    The document describes two optimization problems: 1. Parfum du Lys is launching an advertising campaign for three cleaning products. The objective is to determine the optimal allocation of advertising spending between television and print media to meet sales goals at minimum cost. 2. Coco Scents produces perfumes and must determine the optimal product mix to maximize profits given constraints on the scarce ingredient ambergris and minimum production requirements. An Excel solver model will be created to determine the optimal solution.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Problem Set 5 – More Optimization Problems

    1. Parfum du Lys
    Parfum du Lys produces cleaning products for home use. This is a highly
    competitive market, and the company continually struggles to increase its small
    market share. Management has decided to undertake a major new advertising
    campaign that will focus on the following three key products:
    • A spray prewash stain remover
    • A liquid laundry detergent
    • A powder laundry detergent
    This campaign will use both television and the print media. A commercial has been
    developed to run on national television that will feature the liquid detergent. The
    advertisement for the print media will promote all three products and will include
    cents-off coupons that consumers can use to purchase the products at reduced prices.
    The general goal is to increase the sales of each of these products over the next year
    by a significant percentage over the present year. Specifically, management has set
    the following goals for the campaign:
    • Sales of the stain remover should increase by at least 3%
    • Sales of the liquid detergent should increase by at least 18%
    • Sales of the powder detergent should increase by at least 4%
    The table below shows the estimated increase in sales for each unit of advertising on
    the respective outlets. A unit is a standard block of advertising that Parfum du Lys
    commonly purchases. The reason for -1% for the powder detergent in the Television
    column is that the TV commercial featuring the new liquid detergent will take away
    some sales from the powder detergent. The bottom row of the table shows the cost
    per unit of advertising for each of the two outlets.
    Management’s objective is to determine how much to advertise in each medium to
    meet the sales goals at a minimum total cost. Using an Excel model help
    management to take a decision.

    Increase in sales per unit of advertising


    Product Television Print Media Minimum
    Required
    Increase
    Stain remover 0% 1% 3%
    Liquid detergent 3% 2% 18%
    Powder detergent -1% 4% 4%
    Unit cost $1 million $2 million
    Suppose the data given in the above table has now been changed as shown below.
    What changes, if any, do you need to do in the model? How would the optimal
    decision change?
    Increase in sales per unit of advertising
    Product Television Print Media Minimum
    Required
    Increase
    Stain remover 0% 1.5% 3%
    Liquid detergent 3% 4% 18%
    Powder detergent -1% 2% 4%
    Unit cost $1 million $2 million

    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

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