Company A produces and sells a popular pet food product packaged under two brand names, with formulas that contain different proportions of the same ingredients. Company A made this decision so that their national branded product would be differentiated from the private label product. Some product is sold under the company’s nationally advertised brand (Brand X), while the re-proportioned formula is packaged under a private label (Brand Y) and is sold to chain stores.
Because of volume discounts and other stipulations in the sales agreements, the contribution to profit from the Brand Y private label product is only $30 per case compared to $40 per case for product sold to distributors under the company’s Brand X national brand.
An ample supply is available of most of the pet food ingredients; however, three additives are in limited supply. The tight supply of nutrient C (one of several nutrient additives), a flavor additive, and a color additive all limit production of both Brand X and Brand Y.
The formula for a case of Brand X calls for 4 units of nutrient C, 12 units of flavor additive, and 6 units of color additive. The Brand Y formula per case requires 4 units of nutrient C, 6 units of flavor additive, and 15 units of color additive. The supply of the three ingredients for each production period is limited to 30 units of nutrient C, 72 units of flavor additive, and 90 units of color additive.
Questions to answer:
1) Determine the equations for each of the three constraints that are plotted on the attached “Graph 1,” showing all work necessary to arrive at the equations.
2. Identify each constraint as a minimum or a maximum constraint.
3. Determine how many cases each of Brand X and of Brand Y you recommend should be produced during each production period for optimum production if Company A wants to generate the greatest amount of profit, showing all of your work.
4. Determine the total contribution to profit that would be generated by the production level you recommend in part C, showing all of your work.
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