Case Scenario: A Health Food Blend Case
The BEST Health Food company produces two blends of health food:
1. A mixture named Nutrition. and
2. A mixture named Taste.
The market dictates that BEST produce each month at least 60,000 boxes of the Nutrition mixture and 100,000 boxes of the Taste mixture. Demand for these products is projected to be no more than 100,000 boxes of the Nutrition mixture and 400,000 boxes of the Taste mixture per month.
For next month’s production, BEST estimates it will be able to buy as much as it needs of the three key components for these two health foods at a cost of $3 per pound of component A, $2 per pound of component B, and $5 per pound of component C. Each type of component requires a different type of processing before going into a final health food. The BEST plant is able to process no more than 200,000 pounds of component A, 1,500,000 pounds of component B, and 600,000 pounds of component C in a month’s production period. The capacity for processing each component is independent of the processing demands for the other types.
There are standards for each of the mixtures, based on the weight of the key components.
• A box of the Nutrition mixture must contain 5 pounds of the key components, must contain at least twice as much component C as component B, and must contain at least 20 percent component A.
• A box of the Taste mixture must contain 4 pounds of the prime components, contain no more component B than component C, contain no more than 30 percent of component A, and contain no more than 40 percent of component B.
Based on past experience, BEST believes each box sold of the Nutrition mixture will contribute $16 towards covering the cost of the three prime components, overhead, and profit. Each box sold of the Taste mixture will contribute $15.