Marty the marketing manager would like you to review one of his marketing strategies he has put together.
He is aiming at offering 'experience packages' for patients with a point of difference being the main focus. Patients will come in and be pampered and has come up with 3 packages which offer varying degrees of medical treatment. You are however a little concerned about the figures in his proposal.
The packages consist of either a luxurious, customary or standard experience. The packages use all the same equipment and cost the same to prepare but depending on the type of service there is a difference in cost. An estimated cost of each package is below including the budgeted cost limit.
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Standard
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Customary
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Luxurious
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Available Budget
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Price
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$250.00
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$400.00
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$500.00
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Direct labour
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$75.00
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$125.00
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$200.00
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$1000
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Preparation
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$50.00
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$50.00
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$50.00
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$500
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Clean-up
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$50.00
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$75.00
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$75.00
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$500
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Variable overhead
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$50.00
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$100.00
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$150.00
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$500
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Required:
a) Formulate a linear program to determine the expected mix of medical treatments to ensure the maximum profit is obtained. Provide all workings and solve using a computer package (eg solver in excel) to generate the ideal solution.
You have reviewed Marty budget and think his figures are incorrect and the available budget for direct labour is more like $2,000.00, preparation is $1000, clean-up is $1,500 and variable overhead is more realistic at $1,750. Re-run solver to see if the outcome has changed and make comment.