Business Ethics & Outsourcing

LINEAR PROGRAMMING CASE - REISER SPORTS:

Background

Reiser Sports Products wants to determine the number of All-Pro footballs (A) and College footballs (C) to produce in order to maximize profit over the next four-week plan horizon. Mr. Reiser has hired a team of consultants to determine the product mix that will maximize the firm’s profit. Production requirements are detailed below.

Table 1: Department Production Requirements

The Marketing VP feels that the products should be sold at a new pricing. All-Pro footballs will then have a profit of $4 each and College footballs will have a profit of $5 each.

Also, the head of the Accounting Department doesn’t trust manual calculations and wants Excel solutions for the two pricing strategies. The consulting team is using linear programming (LP) to determine how Reiser can maximize profits (See Attachments 1- 10).

Issue

How many of each product should Reiser Sports make and at what pricing strategy to maximize profit?

LINEAR PROGRAMMING CASE - REISER SPORTS: 2

Alternatives

1. Make only All-Pro footballs under the original price.

2. Make only College footballs under the original price.

3. Make a combination of Pro & College footballs under the original price.

4. Make only All-Pro footballs under the new price of Marketing.

5. Make only College footballs under the new price from Marketing.

6. Make a combination of Pro & College footballs under the new price from Marketing.

Analysis

1. Alternative 1: Make only All-Pro footballs under the original price is suboptimal because making only A (All-Pro footballs) gives a profit of $8,500 and a combination under the original pricing of A and C gives a profit of $9,400 (See attachment 3 & 4).

2. Alternative 2: Make only College footballs under the original price is suboptimal because making only C (college footballs) gives a profit of $6,720 and a combination gives a profit of $9,400 (See attachment 3 & 4).

3. Alternative 3: Make a combination of Pro & College footballs under the original price is optimal, because this combination makes 1,400 Pro footballs & 600 College footballs under the original price, which gives the higher profit of $9,400 (See attachment 3 & 4).

4. Alternative 4: Make only All-Pro footballs under the new price from Marketing is suboptimal because it is because it is $6,800 (See attachment 5) that is less than the profit of the combination of Pro & College footballs in the original price of 9,400 (See attachment 3).

5. Alternative 5: Make only College footballs under the new price from Marketing is suboptimal because it is $8,400 (See attachment 5) that is less than the profit of the combination of Pro & College footballs in the original price of $9,200 (See attachment 3).

LINEAR PROGRAMMING CASE - REISER SPORTS: 3

6. Alternative 6: Make a combination of Pro & College footballs under the new price of Marketing is suboptimal because it is $9,200 (See attachment 5) less than the profit in the combination of original price, which gives a profit of $9,400 (See attachment 3).

Recommendations

This report recommends that Mr. Reiser use the combination of Pro & College footballs under the original price which gives a profit of $9,400. Reiser Sports should make 1,400 Pro footballs & 600 College footballs under the original price to maximize profit.