Page 1 Chocolatier Ltd. •10 year old company that produces and markets chocolates •Established by Miguel Dizon and Raul Gomez •Dizon => in charge of distribution •Gomez => handles production, accounting and company finances •Both partners approve together overall planning and major decisions
Chocolate SweetsEstablished by Miguel Dizon and Raul Gomez
Dizon => in charge of distribution
Gomez => handles production, accounting and company
finances
Both partners approve together overall planning and major
decisions
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Company product is in the medium – high price range
20 retails outlets were opened as a result of the company’s
success
Raised concerns:
1. Each new retail outlet opened, production costs per pound
of
candy rose
2. Company has outgrown the production expertise of the
present
management staff
3. Sales had begun to drop off in several stores due to the lower
–
priced line of an aggressive competitor
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Proposed action point => Develop a cheaper line to sell for
around half of the present price
Two new recipes were formulated: Chocodant and Chocomer
New equipment needed for new lines: mixer and molder
Questions
1. Whether to sell candy to their customers at a cheaper price,
but
it is of inferior quality?
2. Whether the new lines can generate profit?
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Objectives of the Study
To properly analyze the current situation of Chocolatier Ltd. and
find the optimal product mix to maximize the potential profit that
the company could earn.
1. To analyze the current situation of Chocolatier Ltd.
2. To determine the issues that could be addressed to resolve
the
drop of sales of several Chocolatier Ltd. stores.
3. To determine the minimum amount of each product to be
produced to maintain the company’s stability.
4. To optimize maximum profit, while maintaining good quality
of
chocolates by using the simplex method.
5. To develop and recommend other options or recipes to be
utilize
by the company.
X2= per lb. of Chocodant
X3= per lb. of Chocomer
Max Z = 0.86X1 + 0.36X2 + 0.54X3
Subject to:
0
0
0
S1
S2
S3
Zj
6 4 3 1 0 0 2,640
Solution
Variables
Cj - Zj
86/100 63/100 54/100 0 0 0
Ratio
400
86/100
0
0
X1
S2
S3
Zj
1 2/3 1/2 1/6 0 0 440
Solution
Variables
Cj - Zj
0 17/300 11/100 (43/100) 0 0
Ratio
880
633
300
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86/100
0
54/100
X1
S2
X2
Zj
1 1/3 0 0 1/6 (1/1000) 290
Solution
Variables
0 2/3 1 0 0 1/500 300
Cj - Zj
0 (1/60) 0 (43/300) 0 (11/50000)
Ratio
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CONCLUSION:
The group was able to solve the case of Chocolatier Ltd. by using
the simplex method. The problem was first transformed in its
standard form. Then, series of simplex tableau were made until no
improvement is possible. Since the problem relates to profit
maximization, the goal is to pick the non-basic variable with the
largest positive Cj – Zj value.
Because of their competitors Introducing new line of low-cost
products, the company is facing dilemmas as to how to bring back
their market share. In the final tableau, it shows that X1 and X2
remain with solution values of 290 and 300 respectively. In
relation to that, the Zj row under the solution value has a value
of 411.4. This means that Chocolatier Ltd. will be able to maximize
its profit by Php 411.40 if it produces 290lbs of the Premium line
chocolates (x1) and 300lbs of Chocomer (X3).
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RECOMMENDATION:
Lowering the price of the products can make the company brand image
suffer and the quality of the company’s product may be perceived as
of inferior quality. However, because of the declining market share
of Chocolatier Ltd., it is really a challenge for the company to
think of an alternative solution. In order for them to maximize its
profit, the Chocolatier Ltd. should lessen the production of
Premium line chocolates in half and use the remaining in producing
Chocomer. Doing so will not only help increase the sales of the
company, but also maximize the profit of the company.
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