Problem statement
George Clark is about to undertake a wine making project in Sonoma valley, California. George intends to start small as necessitated by his minimal capital and inexperience in wine making business. Resulting from these challenges, George sets out planning on how to optimize from the initial $10000 capital he possesses for the first two years of business (Winston & Albright, 2011). George has to make a decision on the amounts of grapes to purchase to make his desired wine labels; Petite Sirah and Sauvignon Blanc. George also has to decide on how much to spend on advertising, the number of wine bottles to produce, and how much profit he stands to gain over the first two year period. According to George, he believes it is vital that the number of bottles sold for Petite Sirah should fall between 40-70% of the total bottles sold.
Conclusion
Using linear programming spreadsheet model, it is possible to deal with the financial decisions facing George. The linear programming assists in understanding the possible minimum and maximum computations that allow for George to gain a profit in terms of the decision variables. George did not factor in the contributions per bottle for each label in his assumption (Winston & Albright, 2011). The solutions indicate the quantity of Petit Sirah that can get produced without compromising on the total profits to be earned for year 1. If the price of Petite Sirah gets reduced to less than $7 a bottle, then George would experience a loss. George did not factor in all the decision variables and constraints he would encounter in the production of wine. George can also increase profits if he increases the purchase of grapes.
Reference
Wayne L Winston, P. S. (2011). Practical Management Science [With Access Code]. New York:
Cengage Learning.
