Mexican Mamas (MM) started as a home-grown hobby for two Los Angeles mothers whose guacamole was increasingly popular with both family and any friends who had the opportunity to sample it. After several requests to share the recipe, they realized a potential business opportunity of selling small batches prepared in their home kitchen.

Two formulations of prepared guacamole were offered for sale to local markets: Mild and Spicy. The increasingly popular trend to Eat Local and Eat Fresh has provided a good and growing market for these home-made items. Since demand outstrips supply, MM wants to configure its production to achieve these two goals:

1. Maximize profit
2. Make optimal use of ingredients (resources) which are constrained by local sourcing and a strict no chemicals policy

Basic guacamole ingredients comprise avocado, lemon juice concentrate, and salsa. For the spicy formulation only, there is the addition of hot sauce.

Each day a separate production batch is run and shipped out the same afternoon. Basic raw materials are similarly delivered on a daily basis in the following quantities:

Avocados 95 pounds

Lemon Juice Concentrate 13 pounds

Salsa 8.5 pounds

Hot sauce 125 ounces

The business has been simplified in that only one package size is sold- the one-pound clear plastic container. Due to the different chemical interaction of the ingredients, the blending formulation for Mild and Spicy will vary according to the specifications in the following table:

Ingredient	Mild	Spicy
Avocado	3	2
Lemon Juice concentrate	0.36	0.40
Salsa	0.15	0.3
Hot Sauce	0	5

Interestingly, the Mild formulation is the more profitable with a gross margin of $0.58 per container. The extra cost of pricey Hot Sauce reduces the gross margin for Spicy formulation to $0.45.

Using the one-pound container as the unit of measure, develop a recommendation for the product mix that will maximize the gross margin.

1. On a separate sheet, formulate the problem, including all

Labels. This requires identification of the Decision Variables,

the Objective Function, and Constraints

2. Prepare a graphical and algebraic solution. On the graph, plot

one level curve at a value = $11.40. Use the variable MILD

containers as the horizontal (i.e. X) axis.

3. Set up the problem in Excel and use Solver to find the optimal

product mix and maximum gross margin. Run a Sensitivity

Report to answer the questions in #4.

4. Answer the following questions based on your Sensitivity

Report

a- Some of the raw material inputs can be rather heavy

for the two owners to handle each day. If you

wanted to ease this physical burden on their

operation, what ONE ingredient would you

recommend reducing? How much weight would this

eliminate from their handling? Explain the reason

for your answer.

b- An accident causes damage to some of the inbound

raw materials used. If the result is a reduction of 4

pounds of avocados and 1.05 pounds of lemon

concentrate, what would be the revised Gross Margin

for that days shipments? (Use rounded results to 3

decimal places in the Sensitivity Report for your

calculations.)

c- A University of Michigan MBA predicts that even a 20

cent per container increase in the gross margin of

the Spicy containers would not have any impact on

the product mix. How would you respond?