Reference no: EM1315855

Inventory Decisions - Free or unused capacity of freezer of ice cream.

The Sweet Treat Shop sells ice cream and frozen yogurt by the gallon each in a variety of flavors.   The shop makes one order each of the ice cream and yogurt for the week.  The shop has enough storage space in it freezers to hold a total of 200 gallons.   A gallon of the ice cream costs $0.73 to produce while a gallon of yogurt cost $0.64 to produce.   Buying patterns from the past indicate the demand for yogurt never exceeds 115 gallons per week.   The profit for ice cream is $6.00 per gallon while the profit for yogurt is $7.00 per gallon. The shop owner has a budget of $100 for the week to make the ice cream and yogurt.

a. How much unused freezer space (in gallons) is leftover from part "a"?  

b. What action must the owner take in order to take full advantage of all the freezer capacity?  Be Specific. 

c. Assume Sally takes no action to take advantage of leftover freezer space.  The shop is considering advertising to increase its yogurt sales.   The shop estimates it can increase it maximum demand for yogurt by 20% if it spends an additional $100 per week in advertising.  Should the shop consider advertising?  Provide evidence that supports your decision.