Question

Almond Roca is considering three nut mixes for inclusion in a new product line, Mixey Nuts!: Regular Mix, Deluxe Mix, and Holiday Mix. Each mix is made from 5 nuts, in different combinations.

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 Deluxe Mix consists of 20% of each type of nut.

The Holiday Mix consists of 25% almonds, 15% Brazil nuts, 15% filberts, 25% pecans, and 20% walnuts.

An accountant at Almond Roca, Inc., analyzed the cost of packaging materials, sales price per pound, etc, and determined that the profit contribution per pound is $1.65 for the Regular Mix, $2.00 for the Deluxe Mix, and $2.25 for the Holiday Mix. The price of the nuts can vary from month to month.

The estimate the customer orders for the different types to be as follows:

Type of Mix	Orders (pounds)
Regular	10,000
Deluxe	3,000
Holiday	5,000

The president of Almond Roca wants to commit to these a minimum, even if not immediately profitable, in order to introduce these new mixes to the market.

Report:

Summarize this problem, and discuss the following topics:

1. The cost per pound of the nuts included in the Regular, Deluxe, and Holiday mixes.

2. The optimal product mix and the total profit contribution.

3. Recommendation regarding how the total profit contribution can be increased if additional quantities of nuts could be found.

4. A recommendation as to whether Almond Roca should purchase an additional 1000 pounds of almonds for $1000 from a supplier who overbought.

5. Recommendations on how profit contribution could be increased (if at all) if Almond Roca does not satisfy the minimums listed above.

Answer 1

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