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Abotte Products produces three products, A, B, and C. The company can sell up to 300 pounds of each product at the following prices (per pound): product A, $10; product B, $12; product C, $20. Abotte purchases raw material at $5 per pound. Each pound of raw material can be used to produce either one pound of A or one pound of B. For a cost of $3 per pound processed, product A can be converted to 0.6 pound of product B and 0.4 pound of product C. For a cost of $2 per pound processed product B can be converted to 0.8 pound of product C.

Determine how Abotte can maximize its profit.

Determine how much of A to make, how much of A to reprocess into B and C, how much of B to make, and how much of B to reprocess into C. That would be 4 changing cells. Remember that how much you make won't always be how much you have to sell. If I make 200 pounds of A but reprocess change 50 pounds, I will only have 150 pounds of A to sell (200 less the 50 reprocessed) but I get some B and C to sell.

Here are some check figures:

If I make 20 pounds of A and 20 pounds of B, I should use 40 pounds of raw material. Then if I convert half of each, I should have these quantities to sell:

Product A 10
Product B 16
Product C 12

The profit with this plan would be: $282

Hint: The optimal profit I got was: $6,975

Create a spreadsheet in excel. Run Solver to get the optimal result.

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M928423

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