Essay on Case 3.2 Sonoma

1818 Words Jan 24th, 2013 8 Pages
Answer
The problem is to be formulated as two integer programming problems, one for the first year and the other for the second year.

I Year Problem
Total fund available = $10,000

For convenience rename the brand Petite Sirah as Brand I and brand Sauvignon Blanc as Brand II
For Brand I the cost for grape is $0.80 per bottle and for Brand II the cost for grape is $0.70 per bottle.

It is given that one dollar spent for promoting Brand I produce a demand for 5 bottles and one dollar spent for promoting Brand II produce a demand for 8 bottles . This means the advertisement cost per bottle for Brand I is $0.20 and the advertisement cost per bottle for Brand II is $0.125.

The cost-profit structure of the two brands during the
…show more content…
cost |Total cost |Revenue |Profit |
| |produced | | | | | |
|Brand I |62440.000 |46830.000 |10427.480 |57257.480 |515130.000 |457872.520 |
|Brand II |26760.000 |22746.000 |2676.000 |25422.000 |187320.000 |161898.000 |
|Total |89200.000 |69576.000 |13103.480 |82679.480 |702450.000 |619770.520 |

Solution

Thus second year George has to produce 62440 bottles of Petite Sirah and 26760 bottles of Sauvignon Blanc.

He has to spent $ 69576.00 to buy grapes and $13103.48 for advertisement.

He has to produce a total of 89200 bottles of wine.

He can earn a profit of $619770.520

Total revenue available at the end of the second year is $702450.00

Total profit for the two years = $72681.025 + $619770.520 = $6, 92,451.545

Question
After graduating from business school, George Clark went to work for a Big Six accounting firm in San Francisco. Since his bobby has always been wine making, when he had the opportunity a few yeas later he purchased 5 acres plus an option to buy 35 additional acres of land in Sonoma Valley in

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