Exhibit 7-2 A Soda Producer Makes and Sells Two Products, Classic Cola

Essay

Exhibit 7-2
A soda producer makes and sells two products, Classic Cola and Diet Cola. During the planning period, if the producer spends x1 dollars on promotion of Classic Cola, it can sell 100x10.5 cases of Classic Cola, and if it spends x2 dollars on promotion of Diet Cola, it can sell 10x20.75 cases of Diet Cola. Each case of Classic Cola sells for $12.00 and costs $0.95 to produce and ship to customers, while each case of Diet Cola sells for $12.50 and costs $1.00 to produce and ship to customers. A total of $7,500 is available for promotion during the planning period.
-Refer to Exhibit 7-2.Suppose the producer can double the promotional budget.Formulate and solve a nonlinear optimization model to help this soda producer identify the best promotional strategies for its two products in that case.Does the change in profit justify the budget increase
Does the proportional amount spent promoting the two products remain the same