Chapter 2

It is March, and the annual NCAA Basketball Tournament is down to the final 4 teams. Randy Kitchell is a t-shirt
vendor who plans to order t-shirts with the names of the final 4 teams from a manufacturer and then sell them to the
fans. The fixed cost of any order is $750, the variable cost per t-shirt to Randy is $6, and Randy’s selling price is
$10. However, this price will be charged only until a week after the tournament. After that time, Randy figures that
interest in the t-shirts will be low, so he plans to sell all remaining t-shirts, if any, at $4 each. His best guess is that
demand for the t-shirts during the full-price period will be 1500. He is thinking about ordering 1400 t-shirts, but he
wants to build a spreadsheet model that will let him experiment with the uncertain demand and his order quantity.
How should he proceed?

The Woodworks Company produces a variety of custom-designed wood furniture for its customers. One favorite item
is a bookshelf, made from either cherry or oak. The company knows that wood prices and labor costs are likely to
increase in the future. The Table below shows the number of board-feet and labor hours required for a bookshelf, the
current costs per board-foot and labor hour, and the anticipated annual increases in these costs. (The top row indicates
that either type of bookshelf requires 30 board-feet of wood and 16 hours of labor.) Build a spreadsheet model that
enables the company to experiment with the growth rates in wood and labor costs so that a manager can see, both
numerically and graphically, how the costs of the bookshelves vary in the next few years.

Input Data for Manufacturing a Bookshelf

Source Cherry Oak Labor
Required per bookshelf 30 30 16
Current unit cost $7.30 $4.30 $18.50
Anticipated annual cost increase 2.40% 1.70% 1.50%

Sam’s Bookstore, with many locations across the United States, places orders for all of the latest books and then
distributes them to its individual bookstores. Sam’s needs a model to help it order the appropriate number of any title.
For example, Sam’s plans to order a popular new hardback novel, which it will sell for $30. It can purchase any
number of this book from the publisher, but due to quantity discounts, the unit cost for all books it orders depends on
the number ordered. Specifically, if the number ordered is less than 1000, the unit cost is $24. After each 1000, the
unit cost drops: to $23 for at least 1000 copies, to $22.25 for at least 2000, to $21.75 for at least 3000, and to $21.30
(the lowest possible unit cost) for at least 4000. For example, if Sam’s orders 2500 books, its total cost is $22.25(2500)
= $55,625. Sam’s is very uncertain about the demand for this book—it estimates that demand could be anywhere from
500 to 4500. Also, as with most hardback novels, this one will eventually come out in paperback. Therefore, if Sam’s
has any hardbacks left when the paperback comes out, it will put them on sale for $10, at which price, it believes all
leftovers will be sold. How many copies of this hardback novel should Sam’s order from the publisher?

Chapter 3

Maggie Stewart loves desserts, but due to weight and cholesterol concerns, she has decided that she must plan her
desserts carefully. There are two possible desserts she is considering: snack bars and ice cream. After reading the
nutrition labels on the snack bar and ice cream packages, she learns that each “serving” of snack bar weighs 37 grams
and contains 120 calories and 5 grams of fat. Each serving of ice cream weighs 65 grams and contains 160 calories
and 10 grams of fat. Maggie allows herself no more than 450 calories and 25 grams of fat in her daily desserts, but
because she loves desserts so much, she requires at least 120 grams of dessert per day. Also, she assigns a “taste index”
to each gram of each dessert, where 0 is the lowest and 100 is the highest. She assigns a taste index of 95 to ice cream
and 85 to snack bars (because she prefers ice cream to snack bars). What should her daily dessert plan be to stay within
her constraints and maximize the total taste index of her dessert?
Chapter 4
The General Flakes Company sells a brand of low-fat breakfast cereal that appeals to people of all age groups and
both genders. The company advertises this cereal in a variety of 30-second television ads, and these ads can be
placed in a variety of television shows. The ads in different shows vary by cost—some 30-second slots are much
more expensive than others—and by the types of viewers they are likely to reach. The company has segmented the
potential viewers into six mutually exclusive categories: males age 18 to 35, males age 36 to 55, males over 55,
females age 18 to 35, females age 36 to 55, and females over 55. A rating service can supply data on the numbers of
viewers in each of these categories who will watch a 30-second ad on any particular television show. Each such
viewer is called an exposure. The company has determined the required number of exposures it wants to obtain for
each group. It wants to know how many ads to place on each of several television shows to obtain these required
exposures at minimum cost. The data on costs per ad, numbers of exposures per ad, and minimal required exposures
are listed in the Table below, where numbers of exposures are expressed in millions, and costs are in thousands of
dollars. What should the company do?

Exposures to various groups per ad

The Law Minimum
Desperate Malcol Sports Real Lifetim & Required
Housewive m in Cente Worl e CN Orde Exposur
s MNF Middle r d movie N r e
Men 18-35 5 6 5 0.5 0.7 0.1 0.1 3 60
Men 36-55 3 5 2 0.5 0.2 0.1 0.2 5 60
Men >55 1 3 0 0.3 0 0 0.3 4 28
Women 18-35 6 1 4 0.1 0.9 0.6 0.1 3 60
Women 36-55 4 1 2 0.1 0.1 1.3 0.2 5 60
Women >55 2 1 0 0 0 0.4 0.3 4 28
Cost per ad 140 100 80 9 13 15 8 140