A Company Wants to Determine How to Allocate Its $200,000

question 23

Essay

A company wants to determine how to allocate its $200,000 advertising budget to market a new cereal.The company is considering newspaper ads,television ads,and radio ads.The following table illustrates the cost of advertising in these different media and the exposure to new customers reached by increasing the number of ads in each medium.
$\begin{array}{lccc}\text { Media and Number of Ads } & \text { No. of New Customers reached } & \text { Cost per ad } \\ \text { Newspaper: } 1-5 & 700 & \$ 500 \\\text { Newspaper: } 6-10 & 500 & \$ 400 \\\text { Television: } 1-10 & 9000 & \$ 5000 \\\text { Television: } 11-20 & 7500 & \$ 4000 \\\text { Radio: } 1-10 & 4000 & \$ 2000 \\\text { Radio: } 11-20 & 300 & \$ 1500\end{array}$

Use Excel to formulate and solve this problem to maximize audience exposure.

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Definitions:

Profiling Machine

A machine used in manufacturing to shape or outline parts or materials according to a predetermined profile, commonly used in metalworking and woodworking.

Capacity Investment

The allocation of resources towards increasing the production or service capabilities of a business.

Favorable Market

A market condition that is advantageous for sellers, characterized by high demand and the ability to sell at higher prices.

States of Nature

Represents possible outcomes in decision-making under uncertainty, which cannot be controlled by the decision-maker.