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Save on Textbooks! Other   Other Homework Help ( 1213 ) Math   Math- Algebra 1 ( 2437 )   Math- Algebra 2 ( 1189 )   Math- Calculus ( 381 )   Math- Geometry ( 594 )   Math- Other ( 1522 )   Math- Precalculus ( 408 )   Math- Trigonometry ( 285 ) Biology   Biology- Animal ( 155 )   Biology- Cell ( 530 )   Biology- Ecological ( 109 )   Biology- General ( 651 )   Biology- Microbiology ( 100 ) Business   Business- Accounting ( 674 )   Business- Finance ( 511 )   Business- Other ( 454 ) Chemistry   Chemistry- Biochem ( 162 )   Chemistry- Organic ( 166 )   Chemistry- Other ( 1330 ) Economics   Economics- Macroeconomics ( 829 )   Economics- Microeconomics ( 610 ) Essay Service   Essay Correction ( 96 )   Essay Writing ( 396 ) History   History- World ( 831 )   US History- Post 1877 ( 472 )   US History- Pre 1877 ( 347 ) Language   English ( 829 )   Foreign Languages ( 118 )   World Literature ( 196 ) Physics   Physics- Electricity, Magnetism ( 248 )   Physics- General ( 1736 )   Physics- Mechanical, Heat, Sound ( 343 )   Physics- Wave, Quantum Physics ( 114 ) z Medical Questions Your Question John purchased some land for growing grapes. His ultimate goal is to have a successful winery. It will take up to eight (8) years to establish a vineyard on his land. In the meanwhile, he plans to buy grapes from nearby growers for wine brewing, so that he can establish his own label of wine. He has decided to make the preliminary planning horizon two (2) years and would like to estimate the profit over that period He wishes to invest $10,000 in the purchase of grapes over the first two years. His most immediate task is to decide how much of the $10,000 should be allocated to purchasing grapes for the first year and how much should be allocated to purchasing grapes for the second year. In addition, for each year he must decide how much he should allocate to purchasing grapes to make his favorite Petite Jean and how much to purchasing grapes to make the more popular Manta Blanc, have been capturing the attention of a wider market during the past few years in Georgia. Type of Wine Year 1 Year 2 cost/bottle price/bottle cost/bottle price/bottle Petite Jean $0.80 $8.00 $0.85 $8.25 Manta Blanc $0.70 $7.00 $0.75 $7.00 John cannot afford to do any market research to estimate demand. The funds for advertising will come from the initial $10,000 investment. Assume that the cash earned from wine sales in the first year is available in the second year. The local wine- making association has told John that marketing is the key to success in any wine business; generally, demand is directly proportional to the amount of effort spent on marketing. They have provided the following estimates of the demand created per dollar of advertising Demand created per dollar of advertising Type of Wine Year 1 Year 2 Petite Jean up to 5 up to 6 Manta Blanc up to 8 up to 10 John wants to maintain a proper balance of wine products so that he will be well positioned to expand when his winery business is established. Thus, it is important to ensure that the number of bottles of Petite Jean sold each year falls in the range between 40% and 70% of the overall number of bottles sold. Questions 1. John needs help to decide how many grapes to buy, how much money to spend on advertising, how many bottles of wine to sell, and how much profit he can expect to earn over the 2- year period. Develop a spreadsheet in the LP model to help John make decisions. 2. Solve the linear programming model formulated in Question 1. Answer the following questions only after Questions 1 and 2 have been answered correctly: 3. After formulating the model, John learns that Chile and Australia may be flooding the market with high-quality, low-priced white wines over the next couple of years. What would be the effect on profit if the price used for the Manta Blanc in the second year would be only half the original price John calculated? Explain how you arrived at this conclusion. 4. John decides to put his land up as collateral and then borrow the initial $10,000 seed money for this enterprise: He shows his business plan, including the above-mentioned model to the loan officer. The loan officer says, “I see that you do have an allowance in your calculations for the carryover of inventory of unsold wine from the first year to the second year, but you do not have any cost associated with this. All companies must charge something for holding inventory, so you should redo your plans to allow for this.” If the holding charges are $ 0.10 per bottle per year, how much, if any, does John’s plan change? Explain. 5. The president of the local grape growers’ association mentions to John that the farm laborers union may go on strike in the next couple of years. This means that the costs of the grapes might go up by anywhere from 50% to 100%. How might this affect John’s plan? Please Login to Answer the Question LOGIN

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