Question

Current Issues

One of the biggest issues facing this company is the rise in prices of raw materials, especially the iconic almond, which due to drought in California has seen a price rise in recent years. In order to diversify their product line, Brown & Haley has started to expand its repertoire to including other nuts, such as cashews and macadamia nuts. They also have a project underway to test a new product line of packaged mixed nuts. Note that this scenario is fictional and the details do not represent actual operations of Brown & Haley.

The Scenario

The company is considering three nut mixes for inclusion in the new product line: Regular Mix, Deluxe Mix, and Holiday Mix. Each mix is made from 5 nuts in different combinations:

• 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 Brown & Haley completed a cost analysis and determined that the profit contribution per pound is $1.65 for the Regular Mix, $1.90 for the Deluxe Mix, and $2.35 for the Holiday Mix.

Different nuts come from different suppliers. They are shipped in bulk containers and ordering a partial container is not possible. The currently available container sizes and costs are as follows:

Type of Nut	Container Size (pounds)	Cost per Container
Almond	6000	$7800
Brazil	7500	$7350
Filbert	7500	$7150
Pecan	6000	$7200
Walnut	7500	$7450

One container of each of the types of nuts has been ordered and is on the way.

The sales and marketing teams have projected that initial demand for the different types of mixes will be as follows:

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

The president of Brown & Haley wants to commit to producing enough of the various mixes to meet the projected initial demand, even if not immediately profitable, in order to introduce these new mixes to the market.

PLEASE READ THE QUESTIONS

PLEASE READ THE QUESTIONS

PLEASE READ THE QUESTIONS

1. How much of each type of mix should be made using only the nuts already ordered and keeping in mind the President’s requirement to meet the initial demand for each type of mix?  
2. Sometimes small amounts of certain types of nuts become available in secondary markets. Which types of nuts should be pursued in order to increase profit?
3. The marketing department is proposing an upgrade to the packaging of the Holiday Mix that would decrease the profit contribution from $2.35 to $2.29 per pound. Would the number of pounds of each type of mix be changed in the optimal solution? (Note that the President would be impressed if you did not need to rerun Solver to answer this question)
4. If the President’s requirement to meet the initial demand for each type of mix were eliminated would profitability be impacted? If so, by how much?

Answer 1

Solution:

As per policy, only 4 parts of a question is allowed to answer at a time, so answering first five parts here:

Req1)	Almond	Brazil	Filbert	Pecan	Walnut
cost per container	7800	7350	7150	7200	7450
Pounds	6000	7500	7500	6000	7500
Cost per pound,$	1.3	0.98	0.953333333	1.2	0.993333333
Req2)
Regular mix	15%	25%	25%	10%	25%
Deluxe mix	20%	20%	20%	20%	20%
Holiday mix	25%	15%	15%	25%	20%
Total	60%	60%	60%	55%	65%
Initial order:
Requirement of nuts:
Regular mix 10000	1500	2500	2500	1000	2500
Deluxe mix 5000	1000	1000	1000	1000	1000
Holiday mix 3000	750	450	450	750	600
Each nut required:	3250	3950	3950	2750	4100
Optimized profit:	Pounds	Contri per pound	Profit
Regular mix	10000	1.65	16500
Deluxe mix	5000	1.9	9500
Holiday mix	3000	2.35	7050
Optimized profit=			33050
Req3) Almond and Pecan should be pursued in order to increase profit
because both the nuts equavalent important to fulfil order and shipment
carried these nuts 20% short of the other nuts.
Req4) Yes, Almonds can be purchased as cheaper to the Shippment cost.
Increase in Profit per pound:
	Almond	Increase in profit
		of reduction in
		cost by $0.30
Regular mix	15%	0.05
Deluxe mix	20%	0.06
Holiday mix	25%	0.08
Req5) No, filberts should not be purchased as purchase cost is higher
to Shippment cost. PLEASE GIVE ME THUMB UP ..