The SMM Company, Which Is Manufacturing a New Instant Salad

question 37

Essay

The SMM Company, which is manufacturing a new instant salad machine, has $280,000 to spend on advertising. The product is only to be test marketed initially in the Dallas area. The money is to be spent on an advertising blitz during one weekend (Friday, Saturday, and Sunday) in January, and SMM is limited to television advertising.
The company has three options available: daytime advertising, evening news advertising and the Super Bowl. Even though the Super Bowl is a national telecast, the Dallas Cowboys will be playing in it, and hence, the viewing audience will be especially large in the Dallas area. A mixture of one-minute TV spots is desired. The table below gives pertinent data: SMM has decided to take out at least one ad in each option. Further, there are only two Super Bowl ad spots available. There are 10 daytime spots and 6 evening news spots available daily. SMM wants to have at least 5 ads per day, but spend no more than $50,000 on Friday and no more than $75,000 on Saturday. Formulate and solve a linear program to help SMM decide how the company should advertise over the weekend.

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Definitions:

Net Profit Margin

A financial metric that shows the percentage of revenue that remains as profit after all operating expenses, interest, taxes, and preferred stock dividends are deducted.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its share price.

Debt-to-equity Ratio

A financial ratio highlighting the use of debt versus equity in the capital structure supporting a company's assets.

Times Interest

A financial ratio indicating how many times a company can cover its interest payments with its earnings before interest and taxes.