Reconsider the example of choosing the advertising budget for the VRX2000 that is presented in Section 1.4. There it was determined that the optimal level of advertising spending was $135,392 leading to a profit of $77,425. Now suppose that the component prices for the VRX2000 have been fluctuating. The variable cost for producing the VRX2000 has now increased from $295 to $315. Due to the competitive marketplace, VRX feels they cannot pass these costs on to the consumer, so the company plans to keep the selling price of the VRX2000 at $400. 

a. Re-solve the optimization model for the VRX2000 considering the new variable cost. (The original spreadsheet model is available at www.mhhe.com/ Hillier7e.) What impact did the increased variable cost have (if any) on the best level of advertising? 

b. Suppose instead that the variable cost for the VRX2000 decreases to $275. Re-solve the optimization model. What impact did the decreased variable cost have (if any) on the best level of advertising? 

c. Reconsider your hypothesis from part a. After re-solving the model for the different variable costs in parts a and b, what does the relationship between the best level of advertising and the variable cost appear to be? Can you explain the intuition behind this relationship?