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Answers to Red Brand Canners Part II

1. Alternative Formulation:
First deIine the Iollowing additional variables:
w
C
weigh oI tomato grade C allocated to produce whole tomatoes (lbs),
j
C
weight oI tomato grade C allocated to produce tomato juice (lbs),
p
C
weight oI tomato grade C allocated to produce tomato paste (lbs).
The update Iormulation is then:
Maximize ((1.203.24)*100)/18)*(w
A
w
B
w
C
) ((0.363.60)*100)/20)*( j
A
j
B

j
C
) ((1.054.50)*100)/25)*( p
A
p
B
p
C
)
9w
A
6w
B
3w
C
_ 8(w
A
w
B
w
C
) w
A
- 2w
B
- 5w
C
_ 0 (whole tomatoes quality
constraint)
9j
A
6j
B
3j
C
_ 6(j
A
j
B
j
C
) j
A
- j
C
_ 0 (tomato juice quality constraint)
w
A
w
B
w
C
_ 800,000*18 (whole tomatoes production less than demand)
j
A
j
B
j
C
_ 50,000*20 (tomato juice production less than demand)
p
A
p
B
p
C
_ 80,000*25 (tomato paste production less than demand)
w
A
j
A
p
A
_ 600,000 (grade A tomatoes usage less than available amount)
w
B
j
B
p
B
_ 1,600,000 (grade B tomatoes usage less than available amount)
w
C
j
C
p
C
_ 800,000 (grade B tomatoes usage less than available amount)
w
A
, w
B
, w
C
, j
A
, j
B
, j
C
, p
A
, p
B
, p
C
_ 0

The new model solution puts all 800 thousand lbs. oI Grade C tomatoes into Paste (see
spreadsheet)

2. The income Irom selling the tomatoes is $685,000 (Irom the Excel spreadsheet
solution). The cost oI the tomatoes used is $0.18*3,000,000 $540,000. The net
income is $145,000.

3. First make sure to change the Iormatting oI the Shadow price column to allow Ior 3
decimal places. The shadow price Ior Grade A tomato supply is 27.1 cents/lb. and the
allowable increase is 200 thousand lbs. This means a purchase oI 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.

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5. The suggested change will decrease the price oI Canned tomatoes by
$0.48/18$0.0267 per lb. The change impacts three coeIIicients at once (those oI
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 oI grade B and 800,000 lbs oI grade C to
manuIacture Tomato Paste with an average quality oI
(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 oI Grade C tomatoes is $0.198
or 19.8 cents/lb. The allowable increase is 900 thousand lbs. Thus, the increased
quantity oI Grade C tomatoes is within range and Red Brand should be willing to pay
up to $0.198x200$39.6 thousand Ior the entire lot