Answers to Red Brand Canners Part II 1.

Alternative Formulation: First define the following additional variables: wC= weigh of tomato grade C allocated to produce whole tomatoes (lbs), jC=weight of tomato grade C allocated to produce tomato juice (lbs), pC=weight of tomato grade C allocated to produce tomato paste (lbs). The update formulation is then: Maximize ((1.20+3.24)*100)/18)*(wA+ wB + wC) + ((0.36+3.60)*100)/20)*( jA+ jB+ jC) + ((1.05+4.50)*100)/25)*( pA+ pB+ pC) 9wA+ 6wB +3wC 8(wA+ wB +wC) wA - 2wB - 5wC 0 (whole tomatoes quality constraint) 9jA+ 6jB +3jC 6(jA+ jB +jC) jA - jC 0 (tomato juice quality constraint) wA+ wB + wC 800,000*18 (whole tomatoes production less than demand) jA+ jB + jC 50,000*20 (tomato juice production less than demand) pA+ pB + pC 80,000*25 (tomato paste production less than demand) wA+ jA+ pA 600,000 (grade A tomatoes usage less than available amount) wB+ jB+ pB 1,600,000 (grade B tomatoes usage less than available amount) wC+ jC+ pC 800,000 (grade B tomatoes usage less than available amount) wA, wB, wC, jA, jB, jC, pA, pB , pC 0 The new model solution puts all 800 thousand lbs. of Grade C tomatoes into Paste (see spreadsheet) 2. The income from selling the tomatoes is $685,000 (from the Excel spreadsheet solution). The cost of the tomatoes used is $0.18*3,000,000 = $540,000. The net income is $145,000. 3. First make sure to change the formatting of the Shadow price column to allow for 3 decimal places. The shadow price for Grade A tomato supply is 27.1 cents/lb. and the allowable increase is 200 thousand lbs. This means a purchase of 80,000 lbs. at 25.5 cents/lb. should be undertaken 4 From the Sensitivity Report below, the shadow price on the Paste demand constraint is $0.024/lb and the allowable increase is 100 thousand lbs. The proposed increase is 3 thousand cases @25 lbs per case or 75 thousand lbs. which is within the allowable increase. Red Brand would be willing to pay at most $0.024x75 = $1.8 thousand.

5. The suggested change will decrease the price of Canned tomatoes by $0.48/18=$0.0267 per lb. The change impacts three coefficients at once (those of Grade A in Canned, Grade B in Canned, and Grade C in Canned), and hence the sensitivity analysis report is not applicable. 6. The current solution uses 1,200,000 lbs of grade B and 800,000 lbs of grade C to manufacture Tomato Paste with an average quality of (6*(1,200,000)+3(800,000))/2,000,000 or 4.8 which is already more than 4. Hence, the solution will not change by the new requirement. 7. From the Sensitivity Report, the shadow price on supply of Grade C tomatoes is $0.198 or 19.8 cents/lb. The allowable increase is 900 thousand lbs. Thus, the increased quantity of Grade C tomatoes is within range and Red Brand should be willing to pay up to $0.198x200=$39.6 thousand for the entire lot.