Question: Hill-O-Beans Coffee Company blends four component beans into three final blends of coffee: one is sold to luxury hotels, another to restaurants, and the third

Hill-O-Beans Coffee Company blends four component beans into three final blends of coffee: one is sold to luxury hotels, another to restaurants, and the third to supermarkets for store label brands. The company has four reliable bean supplies: Robusta, Javan Arabica, Liberica, and Brazilian Arabica. The following table summarizes the very precise recipes for the final coffee blends, the cost and availability information for the four components, and the wholesale price per pound of the final blends. The percentages indicate the fraction of each component to be used in each blend.
Cost Max Weekly per Availability Pound (Ibs) Component Hotel Restaurant Market Robusta 20% 35% 10% $0.60 40,000 25,000 J

The processor's plant can handle no more than 100,000 pounds per week, but there is virtually unlimited demand for the final blends. However, the marketing department requires minimum production levels of 10,000, 25,000, and 30,000 pounds, respectively, for the hotel, restaurant, and market blends.
a. In order to maximize weekly profit, how many pounds of each component should be purchased?
b. What is the economic value of an additional pound's worth of plant capacity?
c. How much (per pound) should Hill-O-Beans be willing to pay for additional pounds of Liberica in order to raise total profit?
d. Construct a graph to show how the optimal profit varies with the minimum weekly production level of the hotel blend.
e. Construct a graph to show how the optimal profit varies with the unit cost of Robusta beans.

Cost Max Weekly per Availability Pound (Ibs) Component Hotel Restaurant Market Robusta 20% 35% 10% $0.60 40,000 25,000 Javan 40% 15% 35% $0.80 Arabica 15% 20,000 Liberica 20% 40% $0.55 Brazilian 25% 30% 15% $0.70 45,000 Arabica Wholesale Price Per Pound $1.25 $1.50 $1.40

Step by Step Solution

3.26 Rating (170 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

a Summarize the purchasing cost and maximum availability of each type of beans are given in table 1 The four types of beans are blended together and p... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

1301-M-N-A-O(975).docx

120 KBs Word File

Students Have Also Explored These Related Numerical Analysis Questions!