Problem 10-1 GreenLawns provides a lawn fertilizer and weed control service. The
ID: 3130811 • Letter: P
Question
Problem 10-1
GreenLawns provides a lawn fertilizer and weed control service. The company is adding a special aeration treatment as a low-cost extra service option, which it hopes will help attract new customers. Management is planning to promote this new service in two media: radio and direct-mail advertising. A media budget of $3,000 is available for this promotional campaign. Based on past experience in promoting its other services, GreenLawns has obtained the following estimate of the relationship between sales and the amount spent on promotion in these two media.
S = -2R2 -10M2-8RM + 18R + 34M
Where
S = total sales in thousands of dollars
R = thousands of dollars spent on radio advertising
M = thousands of dollars spent on direct-mail advertising
GreenLawns would like to develop a promotional strategy that will lead to maximum sales subject to the restriction provided by the media budget.
(a)
What is the value of sales if $2,000 is spent on radio advertising and $1,000 is spent on direct-mail advertising?
$
(b)
Formulate an optimization problem that can be solved to maximize sales subject to the media budget of spending no more than $3,000 on total advertising.
Max
R2
+
M2
+
RM
+
R
+
M
s.t
R
+
M
- Select your answer -<>=Item 9
R, M
- Select your answer -<>=Item 11
(a)
What is the value of sales if $2,000 is spent on radio advertising and $1,000 is spent on direct-mail advertising?
$
(b)
Formulate an optimization problem that can be solved to maximize sales subject to the media budget of spending no more than $3,000 on total advertising.
Max
R2
+
M2
+
RM
+
R
+
M
s.t
R
+
M
- Select your answer -<>=Item 9
R, M
- Select your answer -<>=Item 11
Explanation / Answer
Given that,
S = -2R2 - 10M2 - 8RM + 18R + 34M
where S = total sales in thousands of dollars
R = thousands of dollars spent on radio advertising
M = thousands of dollars spent on direct-mail advertising
and also given,
for both medias they have spent $3000.
i.e, R + M = 3 (thousand dollars) ------------ (1)
from eq (1), we wrote
M = 3 - R
Thus total sales can be written as a function of R only :
f(R) = S(R , 3 - R) = -2R2 - 10 (3 - R)2 - 8 * R * (3 - R) + 18R + 34(3 - R)
= -4R2 + 8R + 28
f(R) has a unique critical value at R = 1, since
f '(R) = -8R + 8 = 0
==> R = 1
Furthur the critical value corresponds to a local maximum since
f ''(1) = -8 < 0
since f(R) is a quadratic polynomial, the local maximum is also a global maximum .
a) Given that,
dollars spent on radio advertising (R)= $2000
dollars spent on direct-mail advertising (M)= $1000
The total value of sales S = -2R2 - 10M2 -8RM + 18R + 34M
= -2 * (2000)2 - 10 * (1000)2 - 8 * 2000 * 1000 + 18 * 2000 + 34 * 1000
= - 33930000 thousand dollars
= - $33.93 Miillon
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