A beer company has divided Bloomington into two territories. If the company spends x 1 dollars on
Question:
A beer company has divided Bloomington into two territories. If the company spends x1 dollars on promotion in territory 1, it can sell 60x11/2 cases of beer there; and if it spends x2 dollars on promotion in territory 2, it can sell 40x21/2 cases of beer there. Each case of beer sold in territory 1 sells for $10 and incurs $5 in shipping and production costs. Each case of beer sold in territory 2 sells for $9 and incurs $4 in shipping and production costs. A total of $5000 is available for promotion.
a. How can the company maximize its profit?
b. If an extra dollar could be spent on promotion, by approximately how much would the company’s profit increase? By how much would its revenue increase?
c. Use SolverTable to see how a change in the price of beer 1 affects the optimal solution. Do the same for a change in the price of beer 2.
Step by Step Answer:
Promotional expenses Part a Shippingproduction costs and selling prices Territory 1 Territory 2 Unit selling price ...View the full answer
