Problem 9.

10 Maximum Profit per kg Product

Problem 9.10 Maximum Profit per kg Product
Problem Info:
C_X := 0.2 $/kg X C_Y := 0.1 $/kg Y SP_Z := 1.75 $/kg Z

C_Other := 0.5 • SP_Z C_Other = 0.875

If we set kgZ = 1 in the given relationship between kg X, kgY, and kgZ, we can solve for
kgX_Z and kgY_Z which we define as the kg X/kgZ and kgY/kgZ respectively. The given
relationship, therefore becomes:

1 = (1.5)2[1.1*kgX_Z + 1.3*kgY_Z - kgX_Z*kgY_Z]

Solving for kgY_Z as a funtion of kgX_Z, we obtain:

kgY_Z = [1 - 2.475*kgX_AZ] / [2.925 - 2.25*kgX_Z]

Defining this relation as a function
(1 − 2.475 • kgX_Z) kgY_Z as a function of kgX_Z
kgY_Z ( kgX_Z) :=
(2.925 − 2.25 • kgX_Z)
C_kgZ ( kgX_Z) := C_X • kgX_Z + C_Y • kgY_Z ( kgX_Z) + C_Other Cost/kg Z

P_kgZ( kgX_Z) := SP_Z − C_kgZ ( kgX_Z) Profit/kg Z

Note: In this case maximizing the profit is the same as minimizing the cost. Also, the
optimum is not a function of the selling price or the cost of items other than the raw
material costs. Therefore, the optimum coulod be determined by minimizing the raw
material costs.

To determine the optimum value of kgX_Z, we take the derivative of the Profit function
(or, if one wishes the raw material cost function), set it equal to zero, and solve for
kgX_Z

d 2.25 • (0.2475 • kgX_Z − 0.1) 0.2475

P_kgZ( kgX_Z) → − − 0.2
dkgX_Z (2.25 • kgX_Z − 2.925)2 2.25 • kgX_Z − 2.925

Defining the optimum value of kgX_Z as xopt

d Define the function corresponding to the

F ( kgX_Z) := P_kgZ( kgX_Z)
dkgX_Z derivative
Set up to solve for xopt
xopt := 1.6 Initial Guess
Given

(
F xopt = 0)
(
xopt := Find xopt ) xopt = 2.002 Optimum kgX/kgZ
 yopt := kgY_Z xopt ( ) yopt = 2.504 Optimum kgY/kgZ

(
C_kgZ xopt = 1.526) Minimum Total Cost/kg Z

(
P_kgZ xopt = 0.224) Maximum Profit/kg Z

x := 1.6 , 1.7 .. 3 Range for plotting

Profit and Cost per kg Z

2
Profit($/kgZ) and Cost($/kgZ)

1.5

P_kgZ ( x )
1
C_kgZ ( x )

0.5

0
1.5 2 2.5 3
x
kg X/kg Z