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STERN

Decision Models

Optimization Homework
Instructions on the Write-Up
Each question must be answered in words and also must include a printout of the
spreadsheet (as described below). Your submission should include, for each problem, a printout of
your optimized spreadsheet (on one page if possible). Please follow the style of the sample below:
all important formulas are described, constraints are included graphically as <= and all
important parts of the spreadsheet are labeled. Of course, the labeling can be handwritten.
Another option is to use the comments feature in Excel.
To write a comment: either right-click on a cell (and choose Insert Comment) or from the
menu choose Insert|Comment.
To get the comments to print: go to File|Page Setup and then pick the Sheet tab and pick
Comments: as displayed on sheet. Click OK or Print.
To get the file to print with row and column headings: go to File|Page Setup and pick the
Sheet tab and check off row and column headings. Click OK or Print.

A B C D E F G H I
1 BLAND.XLS Bland Brewery Production Problem
Decision Variables
2
C4:D4
3 Product: Ale Beer Total
4 Barrels to Produce: 12 28 Profit:
5 Profit per Barrel: $13 $23 $800
Objective Function
6 =SUMPRODUCT(C4:D4,C5:D5)
7 Product Ingredient Requirements
8 Total Quantity
9 Ingredients: Ale Beer Usage Available:
10 Corn (lbs) 5 15 480 <= 480
11 Hops (ozs) 4 4 160 <= 160
12 Malt (lbs) 35 20 980 <= 1190
13
14 =SUMPRODUCT($C$4:$D$4,C11:D11)
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Selecting an Advertising Budget

A well-known charity is interested in conducting a television campaign to solicit contributions.


The campaign will be conducted in two metropolitan areas. Past experience indicates that, in each
city, the total contributions are a function of the amount of money expended for TV
advertisements. Specifically, the charity has estimated response functions that indicate the
percentage of the population making a donation as a function of the dollars spent on TV
advertising. The form of this function is y 1 e ( x ) , where x represents the advertising
expenditure (in thousands of dollars), y represents the fraction donating, and is a parameter that
differs from city to city. The charity has earmarked a fund of $400,000 for advertising between the
two cities and wants to determine the best allocation of these funds.

City 1 City 2

Response parameter = 0.006 = 0.004

Population 750,000 600,000

Average donation per donor $2.00 $1.50

a) Suppose the charity decides to maximize total donations, given its budget limit on
advertising. How should advertising funds be spent, and what amount will be raised in
donations as a result?

b) Suppose now that there is no pre-specified budget that the charity is limited by, but
whatever amount they spend on advertising, they need to pay it back once the
contributions are in. How should advertising funds be spent in this case?

B6015 Optimization Homework


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