Current Issues

One of the biggest issues facing this company is the rise inprices of raw materials, especially the iconic almond, which due todrought in California has seen a price rise in recent years. Inorder to diversify their product line, Brown & Haley hasstarted to expand its repertoire to including other nuts, such ascashews and macadamia nuts. They also have a project underway totest a new product line of packaged mixed nuts. Note that thisscenario is fictional and the details do not represent actualoperations of Brown & Haley.

The Scenario

The company is considering three nut mixes for inclusion in thenew product line: Regular Mix, Deluxe Mix, and Holiday Mix. Eachmix is made from 5 nuts in different combinations:

• The Regular Mix consists of 15% almonds, 25% Brazil nuts, 25%filberts, 10% pecans, and 25% walnuts
• The Deluxe Mix consists of 20% of each type of nut
• The Holiday Mix consists of 25% almonds, 15% Brazil nuts, 15%filberts, 25% pecans, and 20% walnuts

An accountant at Brown & Haley completed a cost analysis anddetermined that the profit contribution per pound is $1.65 for theRegular Mix, $1.90 for the Deluxe Mix, and $2.35 for the HolidayMix.

Different nuts come from different suppliers. They are shippedin bulk containers and ordering a partial container is notpossible. The currently available container sizes and costs are asfollows:

Type of Nut	Container Size (pounds)	Cost per Container
Almond	6000	$7800
Brazil	7500	$7350
Filbert	7500	$7150
Pecan	6000	$7200
Walnut	7500	$7450

One container of each of the types of nuts has been ordered andis on the way.

The sales and marketing teams have projected that initial demandfor the different types of mixes will be as follows:

Type of Mix	Orders (pounds)
Regular	10,000
Deluxe	5,000
Holiday	3,000

The president of Brown & Haley wants to commit to producingenough of the various mixes to meet the projected initial demand,even if not immediately profitable, in order to introduce these newmixes to the market.

PLEASE READ THE QUESTIONS

PLEASE READ THE QUESTIONS

PLEASE READ THE QUESTIONS

1. How much of each type of mix should be made using only the nutsalready ordered and keeping in mind the President’s requirement tomeet the initial demand for each type of mix?  
2. Sometimes small amounts of certain types of nuts becomeavailable in secondary markets. Which types of nuts should bepursued in order to increase profit?
3. The marketing department is proposing an upgrade to thepackaging of the Holiday Mix that would decrease the profitcontribution from $2.35 to $2.29 per pound. Would the number ofpounds of each type of mix be changed in the optimal solution?(Note that the President would be impressed if you did not need torerun Solver to answer this question)
4. If the President’s requirement to meet the initial demand foreach type of mix were eliminated would profitability be impacted?If so, by how much?