Marty, the marketing manager, would like you to assist in providing information for a marketing strategy he is proposing at the annual general meeting next month. He is focusing only on the maca-sponge and wants to know the optimal product mix. Below is an estimate of the costs of the three sizes of the maca-sponge.

Maca-Sponge Sizes

1.5kg

800 gram

300gram

Selling Price

$30.00

$25.00

$19.00

Costs:

Raw materials

$10.00

$8.00

$3.00

Direct labour

$7.00

$4.00

$2.00

Overhead

$5.00

$4.00

$2.80

Selling and Admin

$3.00

$2.50

$2.20

Each of the three products goes through the same manufacturing process which consists of mixing, spreading, cooking and then packaging ready to be sold. The time for each process, in minutes, is in the table below.

Charles Sturt University Subject Outline

ACC544 202030 S I Page 24 of 35 Version 4 - Published 21 April 2020

Mixing

Spreading

Cooking

Packaging

HOURS REQUIRED

1.5 kg

4

8

30

3

800 gram

10

3

20

2

300 gram

8

8

20

2

HOURS AVAILABLE

8,000

12,000

100,000

10,000

Required:

1. Formulate a linear program to determine the expected mix of maca-sponge, ensuring that the maximum profit is obtained. (8 marks)
2. State the optimal mix and resulting profit. Discuss your results (7 marks)