Develop the objective function and constraints required for the problem. Determine optimal product mix and profit contribution. Please note that the profit contribution per pound of $1.65 for the Regular Mix, $2.00 for the Premier Mix, and $2.25 for the Holiday Mix are the coefficients to use in the objective function. Respond to questions 1,2 and 3 below.
Case Problem
JG's Incorporated makes 3 nut mixes for sale to grocery chains located in the Southwest. The 3 mixes, referred to as the Regular mix, the Premier mix, and the Holiday Mix, are made by mixing different percentages of 5 types of nuts. In preparation for the autumn season, JG's Incorporated has just purchased the following shipments of nuts at the prices shown:
Type of Nut Shipment Amount (pounds) Cost per Shipment ($)
Almond 6000 7500
Brazil 7500 7125
Filbert 7500 6750
Pecan 6000 7200
Walnut 7500 7875
The Regular Mix consists of 15% almonds, 25% Brazil nuts, 25% filberts, 10% pecans, and 25% walnuts. The Premier Mix consists of 20% of each type of nut, and the Holiday Mix consists of 25% almonds, 15% Brazil nuts, 15% filberts, 25% pecans, and 20% walnuts.
JG's Incorporated accountant analyzed the cost of packaging materials, sales price per pound, and so forth and determined that the profit contribution per pound is $1.65 for the Regular Mix, $2.00 for the Premier Mix, and $2.25 for the Holiday Mix. These figures do not include the cost of specific types of nuts in the different mixes because that cost can vary greatly in the commodity markets. Customer orders already received are summarized here:
Type of Mix Orders (pounds)
Regular 10,000
Premier 3,000
Holiday 5,000
Because demand is running high, it is expected that JG's will receive many more orders than can be satisfied.
JG's Incorporated is committed to using the available nuts to maximize profit over the autumn season; nuts not used will be given to a local charity. Even if it is not profitable to do so, JG's president indicated that the orders already received must be satisfied.
A. Perform an analysis of JG's product-mix problem, and prepare a report for JG's president that summarizes the findings. Be sure to include the information and analysis on the following:
1. The optimal product mix and the total profit contribution
2. Recommendations regarding how the total profit contribution can be increased if additional quantities of nuts can be purchased
3. Recommendation as to whether JG's should purchase an additional 1000 pounds of almonds for $1000 from a supplier who overbought.