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Goal Programming Problem

Nicolo Investment Advisors is tasked with creating an investment portfolio for a client with $80,000, focusing on US Oil and Hub Properties while maintaining a maximum risk index of 700 and achieving at least $9,000 in annual returns. Suncoast Office Supplies has set a sales strategy requiring its salesforce to make 200 contacts with established customers and 120 with new customers, while managing a total of 600 to 680 hours of salesforce time to meet a sales revenue goal of at least $70,000. Both companies are balancing financial goals with risk management and resource allocation.

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12 views3 pages

Goal Programming Problem

Nicolo Investment Advisors is tasked with creating an investment portfolio for a client with $80,000, focusing on US Oil and Hub Properties while maintaining a maximum risk index of 700 and achieving at least $9,000 in annual returns. Suncoast Office Supplies has set a sales strategy requiring its salesforce to make 200 contacts with established customers and 120 with new customers, while managing a total of 600 to 680 hours of salesforce time to meet a sales revenue goal of at least $70,000. Both companies are balancing financial goals with risk management and resource allocation.

Uploaded by

lj506
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

NICOLO INVESTMENT ADVISORS

Nicolo investment advisors is facing a problem. One of its clients has $80000
to invest and as an initial strategy, would like the investment portfolio
restricted to two stocks:

Stock Price/Share Estimated Risk


Annual Index/Share
Return/Shar
e
US Oil $25 $3 0.50
Hub Properties $50 $5 0.25

US Oil which has a return of $3, provides an annual rate of return of 12%,
whereas Hub Properties provides an annual rate of return of 10%.

Nicolo’s client would like to avoid a high risk portfolio, thus investing all
funds in US Oil would not be desirable. However, the client agreed that an
acceptable level of risk would correspond to portfolios with a maximum total
risk index of 700. Another goal of the client is to obtain an annual return of at
least $9000.

What should Nicolo Investment Advisors suggest to its client?


SUNCOAST OFFICE SUPPLIES PROBLEM

The management of Suncoast Office Supplies establishes monthly


goals, or quotas for the types of customers contacted. For the
next four weeks, Suncoast’s customer contact strategy calls for
the salesforce, which consists of four salespeople, to make 200
contacts with established customers who have previously
purchased supplies from the firm. In addition, the strategy calls
for 120 contacts of new customers. The purpose of this strategy is
this latter goal is to ensure that the salesforce is continuing to
investigate new sources of sales.
After making allowances for travel and waiting time, as well as for
demonstration and direct sales time, Suncoast allocated two
hours of salesforce efforts to each contact of an established
customer. New customer contacts tend to take longer and require
three hours per contact. Normally, each salesperson works 40
hours per week or 160 hours over the four-week planning horizon;
under a normal work schedule, the four salespeople will have
4(160) = 640 hours of salesforce time available for customer
contacts.
Management is willing to use some overtime, if needed but is also
willing to accept a solution that uses less than the scheduled 640
hours available. However, management wants both overtime and
underutilization of the workforce limited to no more than 40 hours
over the four-week period. Thus, in terms of overtime,
management’s goal is to use no more than 640 + 40 = 680 hours
of salesforce time; and in terms of labor utilization,
management’s goal is to use at least 640-40 = 600 hours of
salesforce time.
In addition to the customer contact goals, Suncoast established a
goal regarding sales volume. Based on its experience, Suncoast
estimates that each established customer contacted will generate
$250 of sales and that each new customer contacted will
generate $125 of sales. Management wants to generate sales
revenue of at least $70000 for the next month.
Given Suncoast’s small salesforce and the short time frame
involved, management decided that the overtime goal and the
labor utilization goal are both priority level 1 goals. Management
also concluded that $70000 sales revenue goal should be a
priority level 2 goal and that the two customer goals should be
the priority level 3 goals.

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