Mrs. Meadows sells two popular brands of cookies, Chip Dip and Soft Chunk Chocolate Chip. Both cookies go through the mixing and baking departments, but Chip Dip is also dipped in chocolate in the coating department.

Frank Roman, vice president for sales, believes that Mrs. Meadows can sell all of its daily production of Chip Dip and Soft Chunk. Both cookies are made in batches of 600 cookies. The batch times for producing each type of cookie and the minutes available per day are as follows.

Revenue per batch for Chip Dip is $150, and the variable costs per batch are $100. Fixed costs of $2,350 are allocated to Chip Dip. Revenue per batch for Soft Chunk Chocolate Chips is $175, and the variable costs per batch are $135. Allocated fixed costs are $1,500.

Set up the target function (contribution margin function) and the constraints for this problem.

Enter these constraints and the target function into Excel Solver or another linear programming package and print out a formula sheet and all of the reports.

REQUIRED

A. What is the optimal product mix?

B. What is the total contribution margin for that product mix?

C. Develop an answer by graphing the solution area.

D. Following the general decision rule, what would the managers of Mrs. Meadows be willing to pay to relax each constraint?

E. Which constraints are binding?

F. By how much could the contribution margin for Soft Chunk increase before the optimal product mix changes?

Transcribed Image Text:

Mixing Baking Dipping Minutes required per batch 15 Chip Dip Soft Chunk 20 30 4,000 40 20 6,000 2,000 Minutes available per day