Chocolate SweetsEstablished by Miguel Dizon and Raul Gomez
Dizon => in charge of distribution
Gomez => handles production, accounting and company finances
Both partners approve together overall planning and major decisions
Page *
C
H
0
0
C
L
A
T
I
E
R
L
T
D
Page *
Company product is in the medium – high price range
20 retails outlets were opened as a result of the company’s success
Raised concerns:
1. Each new retail outlet opened, production costs per pound of
candy rose
2. Company has outgrown the production expertise of the present
management staff
3. Sales had begun to drop off in several stores due to the lower –
priced line of an aggressive competitor
Page *
Proposed action point => Develop a cheaper line to sell for around half of the present price
Two new recipes were formulated: Chocodant and Chocomer
New equipment needed for new lines: mixer and molder
Questions
1. Whether to sell candy to their customers at a cheaper price, but
it is of inferior quality?
2. Whether the new lines can generate profit?
Page *
Objectives of the Study
To properly analyze the current situation of Chocolatier Ltd. and find the optimal product mix to maximize the potential profit that the company could earn.
1. To analyze the current situation of Chocolatier Ltd.  
2. To determine the issues that could be addressed to resolve the
drop of sales of several Chocolatier Ltd. stores.
3. To determine the minimum amount of each product to be
produced to maintain the company’s stability.
4. To optimize maximum profit, while maintaining good quality of
chocolates by using the simplex method.
5. To develop and recommend other options or recipes to be utilize
by the company.
X2= per lb. of Chocodant
X3= per lb. of Chocomer
Max Z = 0.86X1 + 0.36X2 + 0.54X3
Subject to:
0
0
0
S1
S2
S3
Zj
6 4 3 1 0 0 2,640
Solution
Variables
Cj - Zj
86/100 63/100 54/100 0 0 0
Ratio
400
86/100
0
0
X1
S2
S3
Zj
1 2/3 1/2 1/6 0 0 440
Solution
Variables
Cj - Zj
0 17/300 11/100 (43/100) 0 0
Ratio
880
633
300
Page *
86/100
0
54/100
X1
S2
X2
Zj
1 1/3 0 0 1/6 (1/1000) 290
Solution
Variables
0 2/3 1 0 0 1/500 300
Cj - Zj
0 (1/60) 0 (43/300) 0 (11/50000)
Ratio
Page *
CONCLUSION:
The group was able to solve the case of Chocolatier Ltd. by using the simplex method. The problem was first transformed in its standard form. Then, series of simplex tableau were made until no improvement is possible. Since the problem relates to profit maximization, the goal is to pick the non-basic variable with the largest positive Cj – Zj value.
Because of their competitors Introducing new line of low-cost products, the company is facing dilemmas as to how to bring back their market share. In the final tableau, it shows that X1 and X2 remain with solution values of 290 and 300 respectively. In relation to that, the Zj row under the solution value has a value of 411.4. This means that Chocolatier Ltd. will be able to maximize its profit by Php 411.40 if it produces 290lbs of the Premium line chocolates (x1) and 300lbs of Chocomer (X3).
Page *
RECOMMENDATION:
Lowering the price of the products can make the company brand image suffer and the quality of the company’s product may be perceived as of inferior quality. However, because of the declining market share of Chocolatier Ltd., it is really a challenge for the company to think of an alternative solution. In order for them to maximize its profit, the Chocolatier Ltd. should lessen the production of Premium line chocolates in half and use the remaining in producing Chocomer. Doing so will not only help increase the sales of the company, but also maximize the profit of the company.
Page *