A company is trying to determine how to allocate its $145,000 advertising budget for a new product. The company is considering newspaper ads and television commercials as its primary means for advertising. The following table summarizes the costs of advertising in these different media and the number of new customers reached by increasing amounts of advertising:

MSIS 212

HOMEWORK PROBLEMS FOR CHAPTER 7

 SESSION 9:

A company is trying to determine how to allocate its $145,000 advertising budget for a new product. The company is considering newspaper ads and television commercials as its primary means for advertising. The following table summarizes the costs of advertising in these different media and the number of new customers reached by increasing amounts of advertising:

 

 

Media & Number of Ads

Number of New Customers Reached

Cost Per Ad In Dollars

Newspaper: 1  10

1900

1,000

Newspaper: 11 – 20

1700

900

Newspaper: 21 – 30

1400

800

Television: 1  5

10,000

12,000

Television: 6  10

7,500

10,000

Television: 11  15

5,000

8,000

 

 

For instance, each of the first 10 ads the company places in newspapers will cost

$1,000 and is expected to reach 1900 new customers. Each of the next 10 newspaper ads will cost $900 and is expected to reach 1700 new customers. Note that the number of new customers reached by increasing amounts of advertising decreases as the advertising saturates the market. Assume the company will purchase no more than 30 newspaper ads and no more than 15 television ads. How many ads should the company place to maximize the number of new customers reached by advertising?

1. Formulate the LP model for this problem.

2. Create the spreadsheet model and use Solver to solve the problem.

Reference no: EM132069492

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