Revenue per batch for Chip Dip is $150, and the variable costs per batch are $100. Fixed costs of $2,350 are allocated to
Chip Dip. Revenue per batch for Soft Chunk Chocolate Chips is $175, and the variable costs per batch are $135. Allocated
fixed costs are $1,500.
Set up the target function (contribution margin function) and the constraints for this problem. Enter these constraints and the
target function into Excel Solver or another linear programming package and print out a formula sheet and all of the reports.
REQUIRED
:
1. What is the optimal product mix?
2. What is the total contribution margin for that product mix?
3. Develop an answer by graphing the solution area.
4. Following the general decision rule, what would the managers of Mrs. Meadows be willing to pay to relax each
constraint?
5. Which constraints are binding?
6. By how much could the contribution margin for Soft Chunk increase before the optimal product mix changes?