Nuts Production Mix Problem - Research Paper Example

Nuts Production Mix Problem Regular Deluxe Holiday Number to Make 17500 10625 5000 Total Profit Unit Profits 65 2.00 2.25 $61,375 Orders10,000.003,000.005,000.00ConstraintsUsedAvailableExtraLossAlmond0.150.200.256,000 6,000 0 0.00Brazil0.250.200.157,250 7500 250 237.50Filbert0.250.200.157,250 7500 250 225.00Pecan0.100.200.255,125 6000 875 1,050.00Walnut0.250.200.207,500 7500 0 0.00 According to the table above and given all the resource constraints, in order to maximize profit and at the same time having more than enough nuts to satisfy the orders already placed, the company has to produce 17,500 pounds of regular nuts, 10,625 nuts of deluxe nuts and 5,000 pounds of holiday nuts.

This production mix would result to a profit of $24,925 which is equal to the profit contribution as stated above ($61,375) less the cost of almond, brazil, filbert, pecan and walnut nuts which is about $36,450. Hence, 250 pounds of brazil, 250 pounds of filbert and 850 pounds of pecan nuts will go to the free store for a total loss of $1,512.50. Moreover, given the above production mix, the cost per pound of the nuts are:RegularDeluxeHolidayAlmond0.190.250.31Brazil0.240.190.14Filbert0.230.180.14Pecan0.120.240.30Walnut0.260.210.

21 Assuming that the company can bought 1,000 pounds more of almonds from a supplier who overbought for $1,000, the additional profit contribution is $4,958 which is much more than the additional cost of almond. The new production mixes are presented on the table in the next page.RegularDeluxeHolidayNumber to Make11667 17917 5000 Total ProfitUnit Profits1.652.002.25$66,333 Orders10,000.003,000.005,000.00ConstraintsUsedAvailableExtraLossAlmond0.150.200.256,583 7,000 417 446.43Brazil0.250.200.157,250 7500 250 237.

50Filbert0.250.200.157,250 7500 250 225.00Pecan0.100.200.256,000 6000 0 0.00Walnut0.250.200.207,500 7500 0 0.00Hence, in order to increase its contribution profit, the company should exhaust all efforts to buy more of almonds since it is the first nut that gets used up. If the ultimate objective is attain the highest contribution profit, then the company is better off not satisfying the existing orders. The company is better off with the production mix presented below.RegularDeluxeHolidayNumber to Make15000 18750 0 Total ProfitUnit Profits1.652.002.

25$62,250 Orders10,000.003,000.005,000.00ConstraintsUsedAvailableExtraAlmond0.150.200.256,000 6,000 0 Brazil0.250.200.157,500 7500 0 Filbert0.250.200.157,500 7500 0 Pecan0.100.200.255,250 6000 750 Walnut0.250.200.207,500 7500 0 This production mix shows a contribution profit of $62,250 which is $875 higher than if the company satisfies the existing orders. This is so because the Holiday mix uses a lot of almond which is a scarce resource for the production mix. Of course, the quest for profit shouldn't be the end all, be all for the organization.

The company also has to be socially responsible while doing business, and simply ignoring orders for higher gains is not in alignment with corporate social responsibility (Albareda 2008, p. 430).Works CitedAlbareda, L. 'Corporate responsibility, governance and accountability: from self-regulation to co-regulation', Corporate Governance, vol. 8, no. 4, p. 430.